In the past several weeks, Texas-based Ayro (NASDAQ:AYRO) stock has been catching the Wall Street’s attention.
The electric vehicle manufacturer started trading on the Nasdaq composite on May 29 following a merger with DropCar, which was already listed on the exchange. Although it opened at $4.10, by June 4. Ayro stock was down to $2.15.
Yet investors’ risk appetite in EV shares helped push the shares to a high of $8.18 on July 6. Now they are hovering around $5.10.
Investors are wondering whether this newcomer to the EV space can possibly become the next Tesla (NASDAQ:TSLA). After all, the electric vehicle industry has been one of the top performing ones this year. If you are a long-term investor, then you may consider buying Ayro stock if the price goes toward $4 or even lower. Here’s why.
Ayro Is a Young Company
Ayro started in 2017 as Austin Electric Vehicles, which later became AEV Technologies until the merger with DropCar in May. The company designs and manufactures purpose-built, automotive-grade electric vehicles.
It creates sustainable electric solutions for campuses, last-mile delivery, urban commuting, fleet management, and closed campus transport such as golf courses or airports. These light-duty vehicles are typically classified as low-speed electric vehicles (LSEVs) and serve a niche, yet growing, market.
InvestorPlace contributor Luke Lango has recently written in detail about the potential for LSEVs vehicles both in the U.S. and worldwide and hence for Ayro stock.
Recent research by Gabriel Collins of Rice University highlights:
“These little vehicles typically lack the aesthetic appeal of a Tesla, but they protect drivers from the elements better than a motorcycle, are faster than a bicycle or e-bike, are easy to park and charge.”
The company has two EV models, Ayro 311 and Club Car 411. Ayro 311 is a three-wheeled vehicle and Club Car 411 is a compact all-electric vehicle suitable for low-speed logistics and cargo services. They both are zero-emission vehicles and can have multiple configurations to meet customer requirements.
Depending on the features chosen and the level of customization, the Ayro 311 sells for between $10,000 and $14,000. The Club Car 411 starts around $21,000. This new decade is likely to see an exponential growth in LSEV vehicles, which could mean high sales numbers for Ayro.
Tailwinds for Ayro Stock
The LSEV market totaled $4.9 billion in sales in 2019. According to recent research report by Technavio, the global LSEV market is expected to post a compound annual growth rate of more than 30% between 2019 and 2023.
Catalysts behind this growth will likely be “[increasingly] stringent environmental regulations, improvement in electric vehicle R&D, advanced battery technology, and [potential] government subsidies… Within the LSEV market, golf cart will remain the largest application and it is also expected to witness the highest growth over the forecast period due to rise in the popularity of golf sports and development of new golf courses across the globe.”
In 2019, AYRO announced a partnership with Club Car, a business unit of Ingersoll Rand (NYSE:IR). Club Car manufactures electric and gas-powered golf cars for personal and commercial use.
This partnership means Club Car 411 is being marketed through Club Car’s extensive network. Global golf cart market is expected to be worth over $2 billion by 2025. And Ayro is already is in a strong position to take advantage of that growth.
The Bottom Line for Ayro Stock
Ayro is not yet an established firm with considerable sales. Therefore, it is a speculative investment. Furthermore, recent price increases in the sector pushed valuations of EV companies to extremely high levels. Thus, the rally in their shares may take a pause soon. There may be profit-taking in Ayro stock soon.
However, Ayro’s niche market as well as the recent agreement with Club Car should put it on many investors’ watch list. If you have a time horizon of at least two or three years, you may want to commit some risk capital into the shares, especially if Ayro stock declines toward $4 or below.
Meanwhile, Ayro may find itself an acquisition target, which would likely create exceptional value for shareholders.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, including a Ph.D. degree, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan did not hold a position in any of the aforementioned securities.
