Editor’s Note: This article was updated on Jan. 25, 2021, to correct the attached image.
Shares of Ideanomics (NASDAQ:IDEX) have been on fire in the past couple of months, growing by roughly 172%. The positive sentiment surrounding EVs and stellar growth in deliveries in the fourth quarter pushed the stock higher. Its unique sales to financing to charging model (S2F2C) opens the door for massive growth opportunities in the EV realm. Though it’s still prone to volatility, IDEX stock should continue to rise through its strategic acquisitions, which should aid top and bottom-line growth.
Its been a busy few months for the company, as it continues to acquire other enterprises, opening a wealth of new possibilities. For instance, it recently completed the acquisition of title and settlement solutions provider, Timios in expanding its Fintech competencies for the real-estate industry.
In early January, it acquired Utah-based Wireless Charging Provider WAVE in strengthening its Mobile Enterprise Global (MEG) business. Hence, Ideanomics is looking to grow revenues at a healthy pace and target positive EBITDA within the next couple of years. Let’s look at the stock more closely to understand what makes it a fascinating investment.
The Uniqueness of the S2F2C Model
Ideanomics’ MEG segment effectively utilizes the S2F2C model in facilitating the switch for fleet operators to EVs. The model allows the company to provide a holistic service for fleet operators covering procurement, financing, and charging requirements. In return, the company earns a transaction fee based on the dynamics of the arrangement.
One of the main problems for fleet operators is having a ton of different EV manufacturer options and getting overwhelmed by the process. Ideanomics provides its customers with a streamlined selection of manufacturers in line with their requirements. It then aids them in the financing process once the selection is complete.
Ideanomics works with whatever budget is given to them by the fleet operators for financing purposes. Usually, financing companies require at least a 10%-20% deposit in cash and offer a loan for the EV’s remaining value. With bulk orders, the deposits can go up to an incredibly high amount, making things remarkably expensive for fleet operators. Ideanomics, with its financial partners, allows fleet operators to secure the EVs without paying up exorbitant deposits. Its customers can pay what is affordable to them, and the company may also pass on savings associated with the transaction by charging a small fee. Hence, the company’s comprehensive service makes it a one-stop-shop for fleet operators looking at a switch to EVs.
Earning results for Ideanomics has been phenomenal in the past year. Revenues have grown by triple-digits in the past couple of quarters. Its third-quarter results show solid growth in revenues on a year-over-year basis, with more geographic distribution. Out of revenues of $10.6 million in the third quarter, $10.1 million were attributable to its MEG business unit. Moreover, it finished the quarter with roughly $27.6 million in cash. However, its gross margins were concerning, which negatively impacted its operating profits for the quarter.
The fourth quarter is shaping up nicely for the company, with substantial growth in its MEG division. Deliveries in October and November were relatively low but picked up handsomely in December. It delivered an impressive 439 units, primarily in its taxi/ride-hailing business segment. Fourth-quarter activities also include the delivery of a charging system and 13 CATL battery systems. Moreover, the company also signed a deal with Chinese ride-hailing company Didi for 2,000 vehicles.
Bottomline on IDEX Stock
Investors are excited about the EV market’s massive potential, which is expected to grow massively in the coming years. Ideanomics is one of the more volatile EV stocks out there but has a sustainable business model that can be effectively scaled in the coming years. It has a lot going on for it at this time, which is indicative of its revenue expansion goals. With its strategic combinations and unique business model, I expect IDEX stock to grow handsomely this year. Therefore, it’s best to invest in it now before it climbs higher.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article