March 28, 2024

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Ideanomics is a Huge Bet on the Multi-Billion Tractor Marketing Going Electric

The two big spikes in shares of Ideanomics (NASDAQ:IDEX) on above-average volume should tell speculators all that they need to know. Chances are high that IDEX stock will jump above the $3.00 level only to faces significant selling pressure.



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Before assuming Ideanomics will fade again as it did in June and Nov., readers must ask why the stock rose in the first place.

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Why IDEX Stock Rallied Last Month

Ideanomics raised its ownership in Solectrac to 24%. In Oct., it announced a 15% stake in the e-Tractor company. Solectrac’s mission statement is to offer farmers “independence from the pollution, infrastructure, and price volatility associated with fossil fuels.” It does this by making and distributing battery-powered electric tractors.

Instead of using diesel-powered tractors, farmers have an alternative option. And since the electric vehicle market is booming, companies like Solectrac and Ideanomics may tap the stock market to raise cash. This will give it the resources it needs to deliver on that promise. Unfortunately, the rapid jump in IDEX shares, its subsequent fall, and the bearish short float of 15.5% suggest that this EV play will not pan out.

Readers should not dismiss this company as this author has. Because it is focusing only on commercial EVs, the development costs are manageable and the potential to bear fruit. Also, IDEX is investing only another $1.3 million. Its 24% ownership will fall to around 22% when a third-party investment is finalized.

Agricultural Tractor Market

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Ideanomics said the agricultural tractor market is worth $75 billion. The North American market will reach $20 billion by 2023. So, if the company can win even a small portion of the market, it may earn a billion in annual revenue.

To realize that goal, the company is investing in Solectrac’s tractors. Those will get tested against their fossil fuel equivalents. As the project gains media attention, investors may grow increasingly bullish with Ideanomics’ prospects.

The company is not just an EV play. On Nov. 12, at acquired Timios Holdings, a privately-held firm. The deal is worth $40 million. It exposes the company to the mortgage and title industry.

Third-Quarter Momentum

Ideanomics posted steady unit deliveries in its third quarter. Unit deliveries topped 626, up from 97 in the second quarter. It touted its investments in Qingdao and Hangzhou, China sales teams for contributing to its growing sales pipeline.

Revenue grew for three straight quarters and is up 3.4 times from last year. After cutting costs by $1.6 million, shareholders may anticipate the company will eventually reach profitability. It lost 3 cents a share in the quarter, an improvement from the 11-cent loss last year. If operating expenses dropped more, IDEX could have posted a profit.

Financing activities in the nine months ended Sep. 30 worth $45.74 million suggests that the company will not need to sell shares or take on debt. As it consolidates its acquisitions and cuts expenses, revenue will grow and the company will eventually post consistent profit growth.

Fair Value

According to Stock Rover, IDEX stock has a growth, quality, and value score at or below 30/100. Given the poor results, investors should exercise strong caution before speculating on this company. On SimplyWall.st, the site warns investors about the stock’s high volatility and poor past revenue over the last five years. Still, it has a healthy balance sheet and a price-to-book ratio of 8 times. This is below the industry average.

The sentiment is very positive because Ideanomics is investing in the EV space. The hype in the sector is lifting the stock. And if that sentiment changes for the worst, buying momentum could end. Ideanomics is especially at risk of a sharp sell-off when markets realize the EV tractor prospects are not proven. Its investment will not add to its revenue in the near-term. The agricultural industry will need to embrace EV tractors, otherwise, Solectrak will not take any market share. This would undermine the recent rally that Ideanomics enjoyed.

Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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