Based on Polestar’s recent preliminary disclosure of earnings results in 1H22, the company currently boasts slim gross profits that beat the majority of rival start-ups. The company’s recent remarks suggest similar concerns recently raised by industry peers Tesla ( TSLA) and GM ( GM), which have both alluded to logistics constraints and an elevation in related costs during the third quarter as downside risks to consider on near-term delivery volumes.
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While Polestar looks set to deliver on its full year unit sales target, it will likely come at a high cost. This is further corroborated by Polestar’s recent disclosure that “the majority of Polestar 2 cars set for delivery in Q4 are ready and making their way to customers”. While Polestar has not separately disclosed its production volumes, we expect the ramp-up rate to have improved significantly over the same period considering deliveries remain a function of output.
But based on recent remarks from Polestar CEO Thomas Ingenlath, which suggests that the company has already “ doubled output” in the current quarter to catch up on lost output during the monthslong COVID lockdowns earlier this year, reaching its full year delivery target is likely still well within reach. For the current quarter, the company remains about 19,600 vehicles out from its reaffirmed full year delivery guidance of 50,000 vehicles, representing a required weekly run-rate of more than 1,490 vehicles, which is close to double of what it was during the third quarter. During the third quarter, the company reported deliveries of 9,215 vehicles, representing a reduced average weekly run-rate of about 700 vehicles, underscoring the toll of amplified supply chain and logistics snarls experienced at Polestar during the three months through September due to COVID lockdowns and a power crunch across its core Chinese production hubs in Chengdu and Chongqing. Polestar has delivered 21,185 vehicles in 1H22, representing an average weekly run-rate of 820 vehicles (inclusive of weekends/holidays for simpler comparison purposes). Polestar’s Delivery Progress and Implications
While Polestar remains significantly undervalued on a relative basis to peers based on its performance to date, which makes it a reasonable long-term investment at current levels, we remain cautious of near-term volatility as the risk-off environment in equities – especially unprofitable ones – persists on mounting macroeconomic uncertainties. Despite Polestar’s consistent track record in ramping up production volumes at a pace that outperforms its rival EV start-ups, while boasting robust growth in order volumes that continue to outpace supply availability by wide margins, both inflationary pressures and rising borrowing costs now risk derailing its profitability trajectory, which in our view is likely the biggest overhang on the stock’s near-term performance. The selloff continues to underscore elevated market fragility and sensitivity to uncertainties over the near-term macroeconomic outlook, which bodes unfavourably for stocks like Polestar that remain immediately unprofitable under a market climate where investors’ preferences are shifting from “growth at all costs” to “near-term cash flows”. that reinforced wagers for more aggressive rate hikes by central banks over coming months to cool markets and inflation, which would imply further turmoil on corporate growth, profitability and valuations in the near-term.
Specifically, the stocks gave up their gains following the release of stronger-than-expected jobs data in the U.S. Yet, the Polestar stock’s momentum failed to sustain, imitating EV peer Rivian’s ( RIVN) declines following a similar short-lived rally on reiterated full year guidance.
As expected, the stock stormed out of the gate without the lofty valuation premiums that its electric vehicle (“EV”) peers had benefited from during public listings in 2021, while continued deterioration to the broader macroeconomic outlook amid surging inflation, rising interest rates, and a looming recession compounded pains.Įarlier last week, the Polestar stock staged a brief relief rally after reaffirming its full year delivery guidance of 50,000 vehicles despite cautioning continued supply chain snarls and ensuing impacts from COVID lockdowns in China in 2Q22. The Polestar ( NASDAQ: PSNY) stock has lost close to 60% of its value since debuting on the Nasdaq in June.
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