What happened
Valuations for electric vehicle (EV), fuel cell, and charging companies came under pressure this week, and Canoo (GOEV -2.12%), Plug Power (PLUG 11.84%), and Enphase Energy (ENPH 7.67%) saw big valuation pullbacks. The companies' stocks fell 20%, 20.9%, and 9.2%, respectively, according to data from S&P Global Market Intelligence. Meanwhile, the growth-heavy Nasdaq Composite index fell 1.1% in the week, which included only four days of trading due to the market being closed for Good Friday.
Mounting economic concerns weighed on the market this week and contributed to big sell-offs for companies in the EV, charging, and renewable energy tech industries. While many investors have been hoping that some degree of economic slowdown will help depress inflation and cause the Federal Reserve to pivot away from interest rate hikes, new labor data came in worse than expected on multiple fronts and prompted pullbacks for companies with growth-dependent valuations. Canoo, Plug Power, and Enphase also saw sell-offs in conjunction with vehicle production and delivery data published by Tesla last Sunday.
Image source: Canoo.
So what
The market flinched at economic data this week. Data from the Bureau of Labor Statistics published on April 4 showed that new job openings had recently fallen below 10 million, and this was followed by other concerning indicators. A survey from the Institute for Supply Management turned up weaker-than-anticipated indicators for the health of the services sector, and the latest ADP National Employment report delivered lower-than-anticipated hiring results for private companies.
In addition to sell-offs spurred by economic data, some industry-related data also prompted bearish pressures for EV, charging, and battery-adjacent companies. Tesla published its Q1 vehicle production and delivery numbers on April 2, kicking off wide-ranging sell-offs that affected Canoo, Enphase, Plug Power, and other companies in associated fields.
While Tesla's vehicle production in the quarter came in ahead of the average analyst estimate's call for 430,000 made in the period, it fell short of the high-end estimate for 450,000 units. If annualized for the rest of the year, the company's Q1 production numbers also suggest that the company is on track to fall slightly short of its target for 1.8 million vehicles produced this year.
Vehicle deliveries for the quarter were up 36% year over year to hit nearly 423,000, but this represented a deceleration from the 40% annual growth for deliveries that the company has posted in 2022. Last year, the company said that it expected to reach a 50% average annual growth rate for vehicle deliveries in coming years, so the deliveries data appears to have raised some red flags for the market.
The recent data may indicate that Tesla is encountering some production and demand headwinds in conjunction with macroeconomic pressures, and the report created ripple effects for other companies the EV industry and adjacent fields. Recessions have historically tended to be particularly hard on the auto market. Growth-dependent EV and energy tech companies at early business stages could face strong valuation pressures as spending habits shift and purse strings tighten.
Additionally, Canoo saw some fresh bearish coverage from an analyst this week. R.F. Lafferty's Jaime Perez published a note on April 3, lowering the firm's one-year price target on Canoo stock from $6 per share to $3 per share. While the analyst maintained a buy rating on the stock, the company's recent fourth-quarter report arrived with guidance that prompted him to reassess his valuation outlook.
With the stock currently trading at $0.52 per share, the analyst still sees potentially explosive upside for the stock in the near term, but company guidance for "modest deliveries" in the second half of this year and a slow production ramp throughout 2024 caused him to lower his expectations. Canoo stock has fallen roughly 58% year to date and trades down 97% from its high.
Now what
Facing macroeconomic headwinds and some signs of industry-specific pressures, Canoo, Plug Power, and Enphase have seen dramatic valuation pullbacks over the last year and are trading down big from their highs.
Yet even after some dramatic sell-offs, each of these companies still has a growth-dependent valuation. If economic developments prompt the Fed to stop raising interest rates, it could help these stocks see some significant valuation recovery, but there's also the possibility of prolonged economic downturn. While Canoo, Plug Power, and Enphase are all operating in promising industries that look poised for growth, unfavorable conditions could lead to turbulent trading in the near term.
