Trade Alert: Solar and EV Shorts
Well, we are back at it with another busy week of earnings ahead. To start off, let’s get through a couple of trade alerts. We sold almost all of our remaining puts on the solar stocks (ENPH, FSLR, SPWR, and RUN) for a nice gain. Those stocks are all down big since we started betting against them in early April and we want to lock in these profits. As we have said before, solar is a secularly-growing industry and is not something that we want to be short long term. We bought those puts because most of the solar stocks were over-hyped/bubbled up and we wanted to hedge our SEDG position.
We are also taking about half of our profits this morning on our FSR and LCID puts which we put on over the last couple of weeks as hedges against our TSLA and RIVN longs. Lucid reported earnings last night and stock is down after the company reported a wider-than-expected loss. FSR reported this morning and is having a hard time ramping up and is missing numbers too. While LCID’s revenue was up year over year, it was still about $60mm short of analyst expectations as the company only 1,406 vehicles in the first quarter. We think there is likely a lot of weakness across the auto industry right now with interest rates being much higher and consumers getting squeezed by inflation and job cuts. Tech employees specifically are getting hit the hardest and many of those highly-paid folks who lost their jobs at META, AMZN, GOOG, etc. probably cannot afford to buy a luxury $90-$140,000 EV from LCID anymore. The company says that it has enough cash to get through the second quarter of next year, but with waning demand, negative gross margins, and a lot of CapEx in the future, we think it will be a struggle for LCID (and for that matter FSR, and most other EV companies not named TSLA and RIVN) to make it out alive.
Also wanted to mention that MP Materials reported last week and actually came in with a top and bottom line beat. Despite a huge move down in the price of NdPR, the company was able to still generate profits and continue on its plan of commissioning its Stage II production facilities. The company expects to begin generating Stage II materials in the later part of this year which will allow it to sell products directly to manufacturers of permanent magnets is a huge step in the right direction and away from being tethered to China. We bought some more MP after the report and the stock moved up in the last couple of trading sessions. As you all know, the stock has really been beaten up this year.
That’s it for now. Let’s do this week’s live Q&A chat tomorrow at 9am EDT.
