At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

Ener1 is ener-done
Stick a fork in Ener1 (NYSE: HEV). It's ener-done, or so Wunderlich Securities thinks.

Yesterday, the CAPS top-10%-ranked analyst downgraded the stock to "sell" in the wake of an earnings disappointment of apocalyptic proportions. Ener1 reported a $0.51 per-share loss Tuesday evening, which is pretty significant for a stock that cost only three bucks and change itself. Ener1 had hitched its horse too close to the electric carts of key customer THINK Holdings, it seems. Alas, THINK hasn't done too well, and as a result, Ener1 must write off its entire investment in the company -- representing $59 million worth of Tuesday's $85 million loss.

According to Wunderlich, this strategic miscalculation may sound the death knell for Ener1: "The company hopes things will improve, but" with its only major automotive customer going bust, and itself "effectively out of cash," Ener1's only hope for survival lies in finding a new source of capital. Failing that, Ener1 is doomed. Wunderlich prices the possibility of survival at about $1 a share, and recommends that investors sell Ener1 today. Is that the right call?

You already know what I think about the state of the electric car industry. So far, Ford (NYSE: F) and General Motors (NYSE: GM) have chosen Korea's LG Chem as their battery supplier of choice. Stateside, Johnson Controls (NYSE: JCI) has seen some traction at Ford as well. Tesla (Nasdaq: TSLA) has hooked up with Panasonic (NYSE: PC). This basically leaves Ener1 battling with A123 (Nasdaq: AONE) for fourth place. Ener1 appeared to lose that battle when A123 swiped Fisker from it last year, leaving Ener1 grasping at straws ... and coming up with THINK as its only viable option for automotive battery sales.

Now that straw has gone up in smoke. Says Wunderlich: "A $30,000 plastic two-seat electric car just isn't going to attract a mass market," and experience is bearing that out. Last month, THINK embarked upon a major PR campaign in Indianapolis, hometown to its battery supplier, Ener1 subsidiary EnerDel. It flopped big-time.

Offering test drives at local universities, THINK invited a reporter from the Indianapolis Star to take a ride in its electric buggy, and received a simply scathing review in response. A few choice lines:

  • "It's one thing to take a test drive and quite another to drive the THINK City all day ..."
  • "This electric car is a vehicle for people who don't like to drive but have no choice ..."
  • "There are no frills ..."
  • "The doors are hard to shut ..."
  • "The cup holders are inaccessible on the passenger side, under the fake glove compartment ..."
  • And adding insult to an already injurious review: "When you accelerate, the car makes a high-pitched whine like a remote-controlled car."

If Yugo had made an electric car, the reviews couldn't have been worse. Investors may even wonder if Ener1 should take an additional $100 million charge for "bad will impairment" for associating itself with this modern-day Edsel...

Foolish takeaway
Clearly, Ener1 made the right decision in writing off THINK as a bad investment. Unfortunately, it may have been the last arrow in Ener1's quiver, its final, forlorn hope of winning a place in the electric car revolution.

Instead of paying off, this wager has left Ener1 a broken company. Over the past year, Ener1 has burned through more than $150 million in cash, a number that's increased every year over the past half-decade. Its balance sheet is stacked high with debt, 250% the size of its cash on-hand. And its "marquee" customer is a bust. In short, when Wunderlich tells you to sell Ener1 in response to the disaster that was THINK ... it's really a no-brainer.