Electric car manufacturers have been popping up everywhere as the world moves from internal combustion (IC) engine vehicles to cleaner, non-polluting alternatives. Electric cars have seen demand soaring over the past few years, with more people dumping IC engine vehicles.

Development-stage electric vehicle (EV) manufacturer Mullen Automotive, Inc. (MULN) has had a difficult 2022, with the stock declining 93.7% in price year-to-date and 96.7% over the past year to close the last trading session at $0.33.

The company operates in various verticals of businesses within the automotive industry. The company owns some synergistic businesses, including CarHub and Mullen Energy. It is developing Mullen FIVE, a fully electric SUV, and Mullen DragonFLY, an electric sports car.

The demand for automobiles recovered significantly after the pandemic restrictions were lifted, but automobile demand has been affected this year because of high inflation, supply chain disruptions, and a lingering chip shortage.

The soaring gasoline prices this year led to many prospective car buyers shifting to EVs as the operating costs of gasoline-powered vehicles rose substantially. Despite high demand, EV makers have been unable to ramp up production due to high raw material prices, chip shortages, and supply chain disruptions.

The third quarter of 2022 saw EV sales of over 200,000 in the United States, setting a new record. Electric car sales grew faster than any other auto industry segment. According to the Electrified Light Vehicle Sales Report, Americans bought 67% more electric vehicles in the third quarter than in the year-ago period.

However, the high borrowing costs may deter prospective EV customers. Also, charging infrastructure still needs to be improved. Moreover, the proposed tax credits for EVs under the Inflation Reduction Act come with various restrictions, proving counterintuitive.

Here’s what could influence MULN’s performance in the upcoming months:

Weak Financials

MULN’s loss from operations widened 184.5% year-over-year to $18.22 million for the second quarter ended June 30, 2022. The company’s net loss widened 289.9% year-over-year to $59.47 million. Moreover, its net loss per share narrowed by 94.5% from the prior-year quarter to $0.16.

Stretched Valuation

In terms of trailing-12-months P/B, MULN’s 8.59x is 314.3% higher than the 2.07x industry average.

Weak Profitability

MULN’s trailing-12-month ROTC is negative compared to the 6.75% industry average. Likewise, its trailing-12-month ROA is negative compared to the 4.94% industry average.

POWR Ratings Reflect Bleak Prospects

MULN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MULN has an F grade for Value, consistent with its stretched valuation.

It has a D grade for Quality, in sync with its weak profitability.

MULN is ranked #57 out of 64 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to access MULN’s ratings for Growth, Momentum, Stability, and Sentiment.

Bottom Line

MULN is trading below its 50-day and 200-day moving averages of $0.40 and $1.17, indicating a downtrend. MULN is unlikely to capitalize on the industry tailwinds due to its poor financials, stretched valuation, and weak profitability.

Given the uncertain macroeconomic environment, investors holding MULN should consider getting rid of it before the end of 2022.

How Does Mullen Automotive, Inc. (MULN) Stack up Against Its Peers?

MULN has an overall POWR Rating of F, equating to a Strong Sell rating. You might want to consider investing in the following Auto & Vehicle Manufacturers stocks with an A (Strong Buy) or B (Buy) rating: Subaru Corporation (FUJHY), Stellantis N.V. (STLA), and Volkswagen AG (VWAGY).

MULN shares were trading at $0.31 per share on Friday afternoon, down $0.02 (-4.61%). Year-to-date, MULN has declined -94.07%, versus a -15.02% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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