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There Are Too Many Red Flags to Invest in Kaixin Auto Stock

The mere mention of the electric vehicle boom is enough to rev related stocks, like Kaixin Auto Holdings (NASDAQ:KXIN). After all, when it comes to KXIN stock there’s plenty to get excited about.

An electric vehicle is hooked up to a charging cable.

Source: Shutterstock

Analysts saying we’ll see 125 million EVs on the road by 2030. California is banning the sale of gas powered cars by 2035.

European automakers need to sell more EVs with orders to cut CO2 emissions by 40% by 2030. Over in China, its EV market share could grow 14% by 2022.

Plus, the EV boom is only accelerating:

  • Tesla (NASDAQ:TSLA) ran from a July low of $187.43 to $494.75
  • Nio (NYSE:NIO) ran from $6.80 to $47.31
  • Li Auto (NASDAQ:LI) ran from $16 to $36.46
  • Workhorse Group (NASDAQ:WKHS) ran from $4.14 to $23.15
  • Kandi Technologies (NASDAQ:KNDI) ran from $4.10 to $12.92

KXIN stock exploded 2,381% in just days in October.

Perhaps that move was based on EV sector speculation after JP Morgan’s Nick Lai upgraded Nio from a hold to a buy. Barron’s contributor Al Root noted, “Lai thinks China’s EV penetration will be four times higher by 2025, meaning that about 20% of all new cars sold in China would be battery powered.”

Sure, the company was shocked by the run higher.

“There is no change in the status of Kaixin’s business operations since the company filed the last 6-K on Aug. 23, 2020, and its dealership business is still in halt,” the company said in a statement.

Meanwhile, days after the moon shot, Kaixin had announced hopes to cash in on the EV boom after agreeing to merge with Haitoche, a Chinese e-commerce company. Haitaoche apparently wants to use Kaixin’s network to sell electric vehicles as a result.

“Clearly, negotiations with Haitaoche were in the works at that point. It could have offered up that it was in negotiations with another party about a possible combination that may or may not come to fruition,” wrote InvestorPlace’s Will Ashworth. “The fact it chose to stay silent should concern any investor who follows China’s ragged securities enforcement.”

A Closer Look at KXIN Stock

The company initiated legal proceedings against three of its used auto dealerships over operating issues. All of which accounted for a majority of its revenue in 2019.

The company said it has experienced a “significant” loss of revenues. In an effort to resolve those issues it decided to halt its used-car dealership business operations.

As a result of its halt, revenues for the second quarter “will be significantly lower than the revenues in the prior periods and it may not have meaningful revenues starting from the third quarter of 2020.”

Yet, investors jumped into KXIN stock because of the mere mention of electric vehicles. Perhaps I could see these same investors a bridge, too.

Steer Clear of Kaixin Auto Stock

Just because it may get involved with the electric vehicle boom, isn’t enough reason to sink money into the stock. It couldn’t be bothered to mention a potential deal with Haitaoche and its potential EV involvement with the 2,381% move.

It can’t even keep its own house in order with revenues likely to take a hit. You can find far better opportunities in the electric vehicle boom. It won’t pay to waste your time, your effort, or your money on a company like this. It’s not worth it.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.

Article printed from InvestorPlace Media, https://investorplace.com/2020/11/kxin-stock-too-many-red-flags/.

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