A decade ago, one of the biggest concerns about electric vehicles was the cost of the battery and its ability to facilitate a reasonable lifecycle before requiring an upgrade or replacement. But EVs have come a long way, which heavily supports the case now for Ayro Inc (NASDAQ:AYRO). As a specialist in urban-friendly delivery and utility vehicles, AYRO stock immediately distinguishes itself from the competition.
That’s wonderful news if you’re thinking about speculating on the upstart. Rather than going toe-to-toe with sector giant Tesla (NASDAQ:TSLA), Ayro has a different focus: take the EV platform and apply it to “service” vehicles. Thus, the company’s key clients come from academic institutions, government entities, hotels and resorts, and the food, beverage and retail industries.
Both on the surface and deeper into the details, AYRO stock makes perfect sense as a long-term buy. As you know, institutions like large high school and college campuses require the transportation of people and equipment. Traditionally, this role was filled by ultra-compact, combustion-engine vehicles.
However, the emissions that gasoline-powered vehicles emit is obnoxious at best and present health hazards at worst. With Ayro’s EVs, you have zero emissions, eliminating this risk altogether. As well, you don’t have the risk of carbon monoxide poisoning, making compact EVs appropriate for indoor use: think large-scale facilities or sports arenas.
Further, a substantial advantage for Ayro’s service solutions is that they’re easier to maintain. Because EVs have fewer moving parts, clients can save big on maintenance costs. Also, the lifespan of modern EVs are much longer than they’ve ever been, dramatically improving the cost savings.
So, why isn’t everyone pouncing on AYRO stock? It may be the novel coronavirus.
Disruption Cuts Both Ways for AYRO Stock
If I could summarize the bull case for AYRO stock, it’s that it follows major trends in other areas of the economy. Namely, we’re seeing a transition from analog (in this case, the combustion engine) to digital (EVs) technology. And in any other circumstance, I’d probably buy shares without so much as a question.
However, before you back up the truck on AYRO stock, we must have a discussion on the risk factors. Primarily, if the coronavirus worsens – perhaps a massive second (or is that third?) wave during the winter season – it would impact every one of Ayro’s key clients’ industries.
For instance, a utility/transportation EV makes ridiculously logical sense in school campuses. But what will this space look like in the future? With states like California imposing restrictions that could impede the opening of schools, there’s just no need for extraneous acquisitions.
And please don’t think that once Covid-19 goes away, academic institutions will be back up and running. Prior to the U.S. shutting down the Chinese consulate in Houston, American colleges were already fretting over a dearth in Chinese students, many of whom pay cash. Now, the Chinese have every excuse to give the U.S. the middle finger and take their money back home.
Therefore, I see a very real possibility that not only restaurants will go out of business, but also colleges. Oh yeah, that’s another tailwind for AYRO stock.
The company’s Ayro 311 is an ideal solution for food deliveries. Theoretically, the coronavirus bodes well for the 311 because restaurants have been forced into transitioning to a takeout/delivery business model. But if this transition was so viable, why do experts predict that 85% of independent restaurants will permanently close?
A Great Idea at the Wrong Time
Despite my concerns for AYRO stock, I’m not opposed to buying shares. As I said, if it weren’t for the health and economic crises, I’d be all over it. But because we don’t live in the alternate universe that the Trump administration used to preside over, investors can’t just ignore the bigger picture.
Yes, the coronavirus pandemic will eventually fade away, either because of a vaccine or because it killed everyone. However, you can reasonably expect that when society returns, it won’t return to full capacity.
For instance, government-run institutions will probably get close to full capacity. However, they’ll be looking for budget cuts due to the unprecedented costs in fighting this virus. Also, universities will enroll students into their campuses, but not nearly to the extent it did in 2019. And I just mentioned how gutted the restaurant industry could be.
So, if you do buy AYRO, take a measured bet. Also, assume some volatility. If the economic infrastructure can’t return to full capacity, there’s no way that Ayro won’t incur lengthy negotiations regarding what is its true market value.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.