Swerve to Avoid These 2 WallStreetBets Electric Car Manufacturers By StockNews

© Reuters. Swerve to Avoid These 2 WallStreetBets Electric Car Manufacturers

Many analysts expect the stock market to experience another phase of uncertainty in the near term, with Reddit’s wallstreetbets (WSB) community likely looking for short squeeze opportunities in the overcrowded electric vehicle (EV) market. As such, we believe investors must exercise caution and avoid betting on WSB stocks Canoo (GOEV) and Lordstown Motors (RIDE) in the near-term because they look highly overvalued and could be due for further retreats. So, let’s discuss these two names.The growing excitement among investors about the automotive sector going electric was reflected in the impressive rally by electric vehicle (EV) stocks in 2020. Improved automotive performance, government subsidies, and cost-efficiencies have been motivating consumers to switch to EVs. As a result, the booming EV space has been spawning new companies, arguably overcrowding the industry.

Hence, investors must acknowledge that not all the players in this booming market possess sound fundamentals. In fact, the stock prices of many EV players have been witnessing a correction this year due to investors’ concerns over the industry’s overvaluation and production delays due to a global semiconductor chip shortage. Furthermore, investors should take a judicious approach following the huge success of Reddit’s online forum r/wallstreetbets (WSB), which largely targets struggling businesses and gains from them by squeezing short sellers out of their positions. The fundamental weaknesses in most of Reddit plays have caused the short squeezes to be short lived, with the stocks declining quickly after reaching their highs.

Hence, considering the clear disconnect between the fundamentals and price levels of highly speculative Reddit favorites Canoo, Inc. (GOEV) and Lordstown Motors Corp. (RIDE), we think it’s wise to avoid them now. These stocks have witnessed significant price declines lately and are susceptible to further pullbacks.

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