If you think Wall Street’s bulls have gotten ahead of themselves, look again — or for the first time — at Ayro (NASDAQ:AYRO). Let’s see what’s happening off and on the price chart, as well as where and how investors might position for a smarter, risk-adjusted ride in AYRO stock. Let me explain.
In market seemingly dominated by big name stocks, there are plenty of smaller companies with bright prospects and potential for solid growth. Most companies simply don’t resemble the trillion-dollar muscle of Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) whose shares have regularly seen record highs and double-digit gains in 2020 and, combined, are unfathomably valued at more than the GDP of Germany.
Moreover, of the other roughly 4,400 companies publicly traded in on U.S. markets, except for Alphabet’s (NASDAQ:GOOGL) own cap-weighted girth, many of these stocks still offer investors decent opportunities removed from the law of large numbers and possibly too much short-term love from Wall Street. One such lower-impact vehicle is electric car manufacturer AYRO.
If investors think of electric vehicles or EVs, no doubt Tesla (NASDAQ:TSLA) comes to mind. And for good reason. It might not be worth $1 trillion, but at a market capitalization of $278 billion, it’s 10 times the value of Ford Motors (NYSE:F). Let’s face it too. Hands down it’s the must-have transportation for today’s trendsetters yearning to live greener.
But there’s much more to the EV market than conspicuous passenger cars. And that’s where AYRO fits in.
AYRO is in this “other” category within the larger emission-free transportation movement coined low-speed electric vehicles or LSEVs. In the company’s estimation, their best-in-class, low maintenance and versatile sustainable vehicles are ideal for fleet services within universities, business and government campuses, airports, sports arenas, hotels and resorts and the broad-based delivery market.
It sounds promising. And there’s more to the story. AYRO CEO Rod Keller who served as president of cultish, niche alternative transport manufacturer Segway puts the company in the hands of a solid industry veteran. Strong management at the helm is important to say the least. Just look at the turnaround of Advanced Micro Devices (NASDAQ:AMD) under the stewardship of Lisa Sui as one prime example.
What else? AYRO also has products already in its addressable markets. Not a lot, mind you. Last year’s revenues came in around a meager ~$1.0 million. Still, the company isn’t just conceptual. It is already putting its tires to the road.
AYRO has also built a new factory in Austin, Texas. The new facility is capable of ramping production up from 200 to 600 EVs per month. And to make good use of the additional capacity the company has an attractive strategic partnership with Ingersoll Rand (NYSE:IR) subsidiary Club Car. So what?
The way InvestorPlace’s Luke Lango tells it, the partnership is a big deal given Club Car’s extensive distribution network and Ingersoll’s sizable position as a supplier of less-environmentally friendly vehicles within AYRO’s total addressable markets. Further, Luke estimates the global market in need of solutions like AYRO’s could reasonably be in the millions of units.
Is AYRO the perfect investment? Based on the company’s ridiculously small $100 million market cap, it might seem that way. What’s there to lose, right? And it certainly could become a 10-bagger long term. According to Luke’s number crunching, AYRO could see a potential $1 billion+ future valuation. But life and investing are never that simple, especially today.
First off, small cap companies of AYRO’s stature are uniformly more speculative. But maybe more of a challenge is the coronavirus. Amid the novel coronavirus pandemic, the question needs to be asked: Are today’s socially distanced lifestyles and work-from-home trends going to be more secular in nature? If we’re really headed down that road, it’s going to be a big time negative for AYRO and its very public, targeted markets.
AYRO Stock Daily Price Chart
Source: Charts by TradingView
We simply don’t know what life is going to look like a year from now or the year after that. And that could work either way for an investment here. As much, my suggestion for buying a position in AYRO is to take it one day at a time on the price chart. I’d also advise investors guard against becoming a crash test dummy. That means utilizing a limited risk options strategy in lieu of buying shares.
Technically, shares of AYRO are setting up in a potential higher-low formation. With the pattern challenging its recent opening day IPO high and following a bullish gap fill earlier this month, there’s reasons to be positive. A bullish uptrend could be emerging. For taking on long exposure in AYRO though, I’d like to see daily chart confirmation of a pivot low. I’d also demand a presently oversold stochastics indicator to signal a bullish crossover.
If those conditions are met, the purchase of a vertical call spread makes sense. One favored play which fits in well within the framework of the price chart and gives investors intermediate-term exposure is the December $5 / $7.5 call vertical. The spread is currently priced for 35 cents with shares at $4.15. But if purchased for 50 cents or less, following the conditions outlined above, this looks like a superior vehicle for gaining solid long stock risk with much less downside.
Disclosure: Investment accounts under Christopher Tyler’s management do not own any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.