PSNY stock on the back foot, outperformed by EV competitors

PSNY stock lost 0.7% on Wednesday to close at $9.45 for its fourth loss in a row. Polestar shares have lagged the general market of late and only appear to be trading at reduced volumes. The only news of note this week are further pictures that have emerged of the Polestar 5 prototype that was shown off at the Goodwood Festival of Speed in late June.

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PSNY stock volatility has waned in July

Special purpose acquisition company (SPAC) Gores Guggenheim (GGPI) targeted it for more than six months, but Polestar's completion of the merger in late June – and the beginning of trading under the new ticker PSNY on June 24 – saw massive volatility engulf shares of the Swedish EV maker. PSNY stock price closed up 15.7% on its first day of trading under the new ticker, and subsequent sessions saw the stock bounce around in search of price discovery. That era seems to have ended in June. July has featured one session with more than an 8% move and another one just above 5%. The rest of the sessions have mostly settled into movements of 2% or less. This may be worrisome to certain bulls since there does not appear to be much interest in this name

Could it be that Polestar is less dangerous?

Polestar is a Swedish EV automaker that began in the 1990s as Flash/Polestar Racing. This small company focused on souping up Volvos to give them racing performance metrics.

Volvo liked the alternative parts and design changes enough that it bought Polestar in 2015, but that was after China's Geely Automotive bought the Swedish car company itself during the financial crisis in 2009. With Volvo and Geely backing Polestar up with manufacturing prowess, design knowledge and cash, Polestar lacks the excitement of some competitors who have to steer between increasing production and bankruptcy. 

Polestar 5 wows audience at Goodwood Festival of Speed

Polestar 5 prototype has seemingly impressed the limited audience present on its unveiling at southern England's Goodwood Festival of Speed in late June. Though it did not make major waves at the time, more photos have recently leaked about the upcoming PSNY vehicle. The annual English automotive event mostly showcases vehicles with internal combustion engines, but recent years have seen electric vehicles come to the fore. Pictures of the Polestar 5 prototype are making the rounds, and Polestar itself only posted some on its website on July 19.

Polestar 5

The sporty sedan boasts 880 horsepower and two motors, one in the front and one in the rear. Critics at Car & Driver say the Polestar 5 is twice as powerful as the Polestar 2, the current model in production. While the Polestar 2 competes with the Tesla model 3 and Y, the Polestar 5 will compete with the Tesla model S and the Lucid Air. Polestar says the production model for the Polestar 5 will not arrive until 2024 however.

Polestar 3 SUV is the other car fans and investors can look forward to, expected to come out this October. This SUV is expected to bring in the dough for Polestar as SUVs tend to have higher margins. The Polestar 4 is also said to be a smaller SUV/crossover model, but less is known about this specific model or when it will arrive.

CEO Thomas Ingenlath has also mentioned the O2 concept car this summer in interviews. The O2 is a four-seat convertible prototype, but there is no certainty that the O2 will ever become a commercially-produced production vehicle.

EV competitor stocks have mostly been outperforming PSNY

The EV automaker space this week has been mainly surrounded by the industry leader Tesla, which just released earnings results. The Elon Musk-led company easily surpassed Wall Street expectations for the second quarter after reporting adjusted earnings per share of $2.27 on Wednesday night. This was well ahead of the $1.80 consensus figure. Due to ramping up production at its Berlin and Texas factories and also dealing with higher commodity prices, TSLA free cash flow dropped from $2.2 billion during the first quarter to $621 million in Q2. The carmaker's gross profit margin for vehicles also dropped five percentage points to just under 28%, but other automakers were likely impressed to see Tesla drive revenue up about 42% YoY. This shows how much the demand for EVs continues to grow.

From the chart below, readers will see the recent separation in stock performance between US and Chinese EV stocks. Though it is Swedish and is geared toward the European market, Polestar's main production plant is located in China.

PSNY stock is down 21.7% since its merger completion and change to the new ticker on June 24. The only worse performance is Xpeng (XPEV) over this past month. Li Auto (LI) and Nio (NIO) have also lost ground, while US producers Tesla and Lucid (LCID) have both gained ground. This divergence appears mostly to do with general market dynamics as further covid scares have hurt many Chinese stocks, while a reduced forecast for interest rate hikes in the US has somewhat burnished the path for US stocks of late.

Polestar stock forecast: PSNY headed back to $8.64

PSNY stock has been heading back to support at $8.64. After opening at $8.64 to begin July, Polestar steadily trended higher until its range high on July 13. Since then it has been trending down steadily. $8.64 already worked as a base of support back on June 16, though that session saw lows below that level as well. Bulls will likely decide to enter again near $8.64, so we doubt there will be any action or volatility until PSNY price reaches that level.

Based on July's limited data, it appears that there is now resistance between $10.10 and $10.60. This may keep prices down or at least limit upside in the near future. As we have written before, PSNY stock desperately needs a catalyst to recharge its narrative. This seemed to be happening with Polestar management's announcement that 50,000 units would still be delivered in 2022, but the news was quickly digested and forgotten. 

With the 9-day moving average at $9.90 currently and the 21-day moving average at $10.11, this area surrounding $10 seems to put a ceiling in near-term price movements. The Accumulation/Distribution line has also been trending lower since the merge and appears likely to continue below -80 million.

PSNY stock chart, daily