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Volvo: Shaky Road Ahead

Bears of Wall Street profile picture
Bears of Wall Street


Volvo (OTCPK:VLVLY) had a disappointing 2020, and there’s every reason to believe that the company’s business will not return to its pre-pandemic levels in the following quarters. Last year its deliveries fell by 6.2% Y/Y, and the biggest drop of -15% Y/Y came from Europe, which is its largest market that accounts for half of the total sales. As the world goes carbon-neutral and traditional manufacturers expand their presence in the EV space, it will be hard for Volvo to compete with its rivals going forward, since the company doesn’t have a solid lineup of EV vehicles to this day. While Volvo’s stock has appreciated in recent months and outperformed S&P 500, we believe that its momentum will slowly fade away due to weak fundamentals. For that reason, we believe that it’s better to avoid its shares and look for other, more attractive opportunities.

Chart: Seeking Alpha

We See Red Flags Everywhere

Despite the recent growth of Volvo’s stock, we see several red flags, which could prevent it from growing further. Just a few months ago, the company recalled 54k cars in the United States due to a fatal incident involving an airbag defect. According to the regulatory filing, the airbag inflator could break and send different metal fragments when it’s being deployed in different Volvo cars. In addition to that, at the end of 2020 Volvo recalled over 6,000 new diesel and electric trucks across its four model lines in Canada and the United States due to the parking brake issues, which could cause the driver to lose control of the vehicle and increase the risks of crashing. This happened a few weeks after Volvo announced that its Class 8 Volvo VNR EV is ready for release in 2021. This is big news considering that Volvo’s trucks play

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Bears of Wall Street is a community of asset managers and traders who take a pragmatic approach to valuing companies. Bears of Wall Street provide unique research with a bearish sentiment on overvalued or weak companies with declining businesses and poor growth perspectives - companies whose likely depreciation can be capitalized on. They lead the investing group Best Short Ideas where they provide: trading alerts, weekly short ideas, live portfolio tracking, cash flow models, and chat for dialogue with the service leaders and community. Learn more.

Analyst’s Disclosure: I am/we are long XPEV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

As others have pointed out, Volvo AB (which is publicly traded) is not the same as Volvo Cars (which is a subsidiary of Zhejiang Geely Holding Group Co (not to be confused with the publicly traded Geely Automobile Holdings Ltd which is just the geely brand). In other words, you cannot invest in Volvo Cars so giving a bullish or bearish thesis on the company is redundant. Either way, Volvo Cars announced today that they plan to only sell EVs (and only through their own online store) by 2030. Furthermore they own big parts of Polestar and Lynk&Co which are all EV. So even if you could invest in the company, your analysis seems lazy at best.

In regards to Volvo AB, they are leading in EV trucks and autonomous trucks, they plan to be fully fossil free by 2040 and have multiple investments in hydrogen as well. They already have fully autonomous and electric trucks on the road, which is way ahead of their competitors. Furthermore you seem to forget that they have multiple brands as well, and not only Volvo, for example Renault trucks, MACK and many more. Also you don't touch on valuation at all which is quite attractive for Volvo AB stock. (www.volvogroup.com/...) (www.volvogroup.com/...) (www.volvogroup.com/...)

You should redo or delete this post, as it is wildly misleading.
Long LI they are doing great
This is embarrassingly bad. SA editors should be ashamed of themselves for letting this dead horse get out of the barn.
@FiscalResp i bought 100 volvo shares today (then stumbled on this silly article).
Who wrote this? A robot? Might be a good idea to know what company you are writing about before reaching a conclusion.
Hmmm, according to Wikipedia:

"The heavy truck and construction equipment conglomerate AB Volvo and Volvo Cars have been independent companies since AB Volvo sold Volvo Cars to the Ford Motor Company in 1999. Volvo Cars has been a subsidiary of the Chinese manufacturer Geely Holding Group since 2010."
@Bears of Wall Street thanks for your article. Two points which you might want to consider for your next article on this subject. 1) Re your 'wither China strategy' for Volvo, you might want to remember that Volvo's owner is Geely, one of the largest Chinese auto players. 2) On a related point, Geely also owns half of Polestar which seems to becoming Volvo's electric first arm.
Eric Bradley profile picture
The XC40 recharge is nice. I’m debating between it, model Y, and Audi Q4. I will buy one of the 3 this summer.
@Eric Bradley
I can recommend the Xc40.
Personally I'm driving the polestar 2 but they share the same base. Best driving feeling I ever had.
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