Polestar Automotive (NASDAQ: PSNY), being just like any company, aims to impress with its earnings reports. The recent headline boasting an 82% surge in deliveries in the second quarter of 2024 might sound like music to investors’ ears. However, beneath the surface lies a tale much more profound and far less rosy. Here are some crucial details to ponder over before considering a buy-in of this electric vehicle (EV) stock.
The Road to Compliance
Mid-August saw Polestar proudly announce that it had restored its compliance status by filing its Annual Report with the U.S. Securities and Exchange Commission. Non-compliance often signifies a company’s failure to meet an exchange’s expectations, usually in financial reporting. The company’s prior inability to deliver financial statements on time led to regulatory red flags, compounded by a notice due to its stock dipping below $1 per share. A cautionary tale indeed.
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The delayed 20-F filing was attributed to the need for extra time to rectify errors in earlier financial statements, showcasing a cause of concern for a stock trading at nearly $1 a share.
New Leadership, Old Problems
Simultaneously fighting compliance issues with the SEC and Nasdaq, Polestar opted for an entire leadership reshuffle. The hiring spree included a new CEO, head of design, head of global communications, and the recent addition of a new CFO. Such drastic measures alongside accounting irregularities can deter conservative investor appetites.
Financial Storm Clouds
Beyond the glitzy headlines, Polestar’s financial statements for the quarter spelled gloom. Revenues plummeted by 17% year-over-year due to lower global vehicle sales and aggressive discounts. A stark red flag was the gross profit nosedive from $900,000 to negative $2.4 million, indicating operational inefficiencies.
Research and development cuts of 76% may be pegged to a shift in expense treatment for a new model. However, in a high-stakes auto industry, skimping on innovation can spell trouble. The narrative doesn’t bode well.
Profit—or the Lack Thereof
It’s worth noting that Polestar’s $242.3 million loss in the second quarter showed a modest improvement over the previous year. But a broader look reveals a consistent lack of profitability since inception, further exacerbated by leadership tumult and accounting mishaps. A thorny path to traverse for investors.
The Risky EV Road
Polestar, alongside a few other EV newcomers, attempts to crack the auto industry with electric vehicles. However, the journey seems steep, with Tesla being the sole success story so far. Investor sentiment, as shown by a stark 90% share value drop, indicates waning enthusiasm. Unless one embraces significant risk, Polestar may not be the prime choice.
Final Thoughts
Amidst the whirlwind of Polestar’s tribulations, foreseeing a profitable venture remains uncertain. Prudent investors may reconsider before jumping on this turbulent ride.