It’s been an attention-grabbing and bullish year for Ideanomics (NASDAQ:IDEX). The attention wasn’t all good and therein lies a warning or two for IDEX stock investors. Let me explain.
Most of the attention was due to the company’s business pivot. Such a move can be smart for shorter and long-term market gains. You probably don’t need me to tell you that after 2020’s socially distanced reality, when pivoting went hand-in-hand with a move into personal protective equipment in an effort to help, as well as profit from Covid-19.
Consider Ford (NYSE:F) and General Motors (NYSE:GM). Under the direction of the U.S. government the automakers became ventilator manufacturers. And more than a few drug companies literally dropped everything and turned all their efforts to find successful vaccines and therapies to combat the coronavirus. Today of course our hats go off to Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), Regeneron (NASDAQ:REGN) and select others where that mission is being accomplished.
But back to the most recent business pivot at Ideanomics. And in our estimation, it’s a less-than-trustworthy change of direction by the company.
IDEX Stock Searches For Purpose
So, what is Ideanomics? We might pose that very question to the company’s management. Over the last 15 or so years, the company has jumped from one hot industry to the other. As InvestorPlace’s Vince Martin explains, IDEX has sold and marketed itself as a broadband provider and video-on-demand play in its past. More recently, management regrouped as a fintech cryptocurrency and blockchain company. Cool and nimble, right? Not so fast.
It turns out the only consistent endeavors where IDEX excels is pitching a hot-sounding idea that shoots mostly blanks. The company’s track record of success is sketchy at best. Seemingly, 2019’s outlier of roughly $43 million in gross profit was tied in part to a pair of cryptocurrency transactions, which eventually went bust. So much for Ideanomics’ crown achievement.
Then comes 2020 and an electric vehicle market that has taken hold of Wall Street’s fancy.
Today, Ideanomics’ mission includes monetizing the adoption of commercial electric vehicles or EV’s. Specifically, IDEX has — drumroll please — pivoted or more aptly reinvented itself as an EV play focused on the e-taxi market, along with a couple investments in a private e-tractor manufacturer.
The company’s Mobile Energy Global (MEG) division is “busy” developing its platform for electric taxis, with an eye on expanding into other vehicles such as buses and trucks. The business model certainly sounds good on paper. And the price chart of IDEX stock also has the appearance of success going forward. However, I’d caution today’s investors not to dismiss the prospect of history repeating itself.
IDEX Stock Daily Price Chart
With the EV market charging higher this year and a wave of IPOs and SPACs briefly riding the Tesla (NASDAQ:TSLA) halo effect, it’s small wonder IDEX stock was up in 2020. Moreover, with TSLA’s $650 billion valuation and gains in excess of 700%, maybe Ideanomics’ return of 130%, its small-cap $550 million market capitalization and series of higher highs and higher lows on the price chart make it a speculative gamble worth entertaining.
Bottom-line, I’m all for enterprising small businesses. Maybe especially so today when a handful of mega-caps from Tesla, Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) hold so much influence. Still, the EV market has become overheated in 2020 and IDEX’s rubber has yet to meet the road. Toss in a history of questionable names changes and a son’s company which has shown a knack for flops and takedowns not unlike his famous father’s World Wrestling Federation, and the friendly advice is to tread very lightly.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.