Red alert for Polestar stock price: a heap of headwinds ahead

By:
on Nov 9, 2023
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  • Polestar share price has crashed by over 80% from its all-time high.
  • The company published a mixed financial report on Wednesday.
  • Its total revenue jumped in the third quarter as cash burn surged.

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Polestar (NASDAQ: PSNY) stock price freefall continued as the company slashed its guidance and warned of an impending capital raise. The shares collapsed to a low of $2.18 on Thursday, the lowest level on record. It has plunged by more than 86% from its all-time high, giving it a market cap of over $4.7 billion. 

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Weak financial performance

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The electric vehicle industry is going through a major slowdown as prices remains quite restrictive in a high-interest rate environment. It is also contending with rising competition from companies like Tesla, Rivian, Lucid Motors, and Fisker Automotive.

Polestar, a company that was spun off from Volvo, is struggling, as evidenced by its weak financial results. The figures revealed hat the company delivered 13,976 vehicles in the third quarter, a 51% YoY increase. This led to a 41% revenue increase to over $613 million. 

Its revenue growth was due to higher volumes and price increases during the period. Its gross profit was just $4 million. The company used $1.3 billion in cash for its operations and it expects to deliver 60k vehicles this year. 

Nonetheless, it also expects to struggle with its cash issues as the cost of doing business rises. As a result, it has raised $450 million from Volvo Cars and Geely. It also expects to raise $1.5 billion as it aims to break even in 2025.

Polestar finds itself in a difficult position. While its vehicles have good reviews, the reality is that competition is a big challenge. In China, we now have more than 100 companies in the EV industry. 

Similarly, recent reports by companies like CNBC and New York Times show that EVs are not selling as fast as they used to a few months ago. Companies like Ford and General Motors have had to slash their EV targets.

Therefore, I believe that Polestar is getting quite ambitious in an era where interest rates are set to remain high for longer. It will also need to raise more capital than the $1.5 billion it is talking about. 

Polestar stock price forecast

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Polestar stock

PSNY chart by TradingView

This technical analysis will be quite simple. As shown below, the PSNY stock price has been in a deep sell-off in the past few months. In this period, it has continually made some lower lows. It has remained below all moving averages and the important support level at $3.14, the lowest point in April, May, and July.

Therefore, for most companies, this would be an ideal time to buy the dip. However, in Polestar’s case, I see no catalyst that could push it higher. Therefore, the shares will likely continue falling in the near term.

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