Thanks to innovators like Tesla (NASDAQ:TSLA), the electric vehicle has gone from a niche concept to a growing mainstream reality. But does that mean every company involved in this market is worthy of your investment dollars? That’s the dilemma behind Ideanomics (NASDAQ:IDEX) stock.
On paper, it appears that the company is on the right path. As well, IDEX stock has occasionally enriched speculators.
Still, the question remains: if you were looking for a long-term EV platform, does Ideanomics make the grade? Our own Matt McCall has a blunt message: don’t hold your breath.
Though McCall has frequently cited the Roaring 2020s as a period where investors can enjoy tremendous profits due to the convergence of multiple technologies, not everything will soar. Indeed, he sees IDEX stock as a perennial gamble, writing:
Back in 2014, this company was known as YOU on Demand, a Chinese VOD (video-on-demand) company. First changing its name to Wecast Network, then Seven Stars Cloud, the company had morphed into a fintech play by 2018. Shortly after that, it adopted the Ideanomics name, and began another strategic shift: into the EV sector.
So far, none of this has helped to turn IDEX stock into a long-term compounder. Instead, shares have traded wildly, soaring as speculators rush in on the heels of a good press release. Post-hype, shares have usually fallen back to prior price levels.
Agree or disagree with the thesis, this is the most succinct description of IDEX stock that I’ve read. Basically, this is a company that has transitioned from one business to another, and its price chart reflects the confusion.
That’s not to say that you can’t make money off of penny stocks or investments that trade like one. However, you have to assume that a positive bit of news or a well-crafted press release is coming. And in the meantime, you must hope that shares don’t get derailed by bad news.
Again, you can make profits here, but it’s not good for your blood pressure.
Both Opportunities and Risks Abound for IDEX Stock
Though the technical characteristics of IDEX stock resembles a pump-and-dump (drives higher on positive news, then quickly collapses), there are some fundamentally intriguing catalysts. One of them is its S2F2C business, or “sales to financing to charging.”
Through this holistic approach to the EV industry, Ideanomics is able to serve fleet operators wishing to make the conversion to the electric platform, offering various solutions throughout the acquisition and operation spectrum.
Beyond the environmental impact, there’s an argument to be made that commercial fleet owners can realize cost benefits over the long run by going electric. Though EVs are more expensive than their combustion counterparts (for now), over time, the inherently superior reliability (due to fewer moving parts) and fuel cost savings will make up for the initial upfront cost. After the break-even point, it’s all gravy.
But here’s the fundamental and ironic problem with the “over time” argument. Many proponents of EV integration cite that lower battery costs will allow electric cars to reach parity with gasoline-powered cars. Sure enough, lithium-ion battery pack costs have declined by an average of 18.6% between 2015 through 2020.
That’s wonderful news for the prospective buyer, who can just wait a few years and get a smoking good deal. But what about the fleet operators? Wouldn’t they also be incentivized to wait a few years? At scale, extra (and especially unnecessary) costs rack up very quickly. Plus, news of advanced technologies such as solid-state batteries can also encourage fleet owners to wait, which doesn’t help IDEX stock in the here and now.
Plus, I’m not entirely sure if the electric-based transportation is the panacea that seemingly everyone is making it out to be. For instance, EV platforms are heavier than their combustion-engine counterparts. According to InsideEVs.com, this can accelerate tire wear by as much as 30% relative to conventional vehicles.
More Lingering Questions
Should a fleet operator decide to go electric, another challenge will soon become apparent: the convenience factor. Large commercial-grade EVs will obviously take longer to charge. Yes, supercharging is an option but the battery degradation over time (lithium-ion batteries don’t like to be constantly charged/discharged) will eat into the platform’s cost savings.
To be fair, Ideanomics has a solution for this problem: wireless charging. Theoretically, this innovation will allow commercial EVs to eliminate their range limitations. So, it may come as no surprise that Ideanomics acquired a wireless-charging specialist.
However, this implies a significant upgrade to infrastructure, which municipalities may or may not agree to. More importantly, I believe the health and safety implications of wireless charging systems, especially at this scale, will impose a headwind.
Overall, Ideanomics has great ideas. But whether these concepts can convert to commercial viability has always been the question, not just for IDEX stock but for similar endeavors. For speculators, there might be something here. But personally, I’m still going to sit this one out.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.