What is Ideanomics (NASDAQ:IDEX) exactly? That may seem like a weird question, given the recent performance of IDEX stock, but looking through the company’s recent press releases and investor presentations, it’s not particularly clear what the company is trying to achieve.
So far, IDEX stock is going up, as traders look to the company’s multitude of different initiatives and subsidiaries.
However, I fear that Ideanomics is simply throwing a ton of stuff against the wall to see if any of it sticks. The company has launched so many different lines of business and acquisitions recently that it’s hard to get a sense of what is actually the priority for the company.
Let me explain.
A Closer Look at IDEX Stock
Looking through Ideanomics’ latest investor presentation, you find a company that is all over the place.
First off, Ideanomics itself is two businesses. You have Ideanomics Mobility, which is the umbrella that holds all the different electric vehicle (EV) efforts that the company is making.
Then you have Ideanomics Capital. What is Ideanomics Capital? The company states that its capital business is:
“Focused on fintech and its disruptive impact across financial services, from financial markets through to mortgages where U.S. home sales are forecasted to grow 21.9% in 2021 (6.9 million homes).”
So, while Ideanomics ostensibly is an electric vehicle company, it also wants to profit from the rise of U.S. housing prices. That seems a little ambitious, particularly for a company with as thin an operating history as Ideanomics.
It also mentions Bitcoin and cryptocurrencies in its presentation, though it’s unclear what involvement, if any, Ideanomics has with Bitcoin at the moment. Regardless, it seems Ideanomics wants to associate itself with as many trendy products and services as possible.
Ideaonomics Mobility: No Central Narrative Here Either
Let’s ignore the capital business for a moment. Hopefully, it doesn’t take up too much of management’s attention so they can focus on the EVs, because that’s what the market loves right now. So what is Ideanomics Mobility?
The company intends to be a leader in charging, battery swapping, battery sales, finance and leasing services, producing zero-emission buses and trucks, electric mopeds, and electric tractors for agricultural use among other things. Again, that’s an awful lot to chew off all at once.
Any one of these could be a great standalone business if done well. You don’t need to try to run this many totally different businesses all at once.
We have plenty of EV companies devoted to building just one thing, such as a truck, bus, SUV, or whatnot and doing it well. Taking a scattershot approach to a zillion different things probably isn’t going to be the best route forward.
Ideanomics may be able to pull it off, but generally, this sort of approach simply isn’t going to be the winning one, at least not until management has already demonstrated a track record of being able to run various disparate businesses at once.
Lackluster Financial Results
Not surprisingly, Ideanomics has not put up strong results yet. Again, it’s such a far-flung business that it seems difficult to manage. Just consider that the Moped business is operating in Thailand, the electric tractors are in California, and so on.
The company’s financial results paint a cloudy picture. For Q3, it generated $10.6 million in revenues in total. Despite having a ton of different businesses, even putting it all together, the overall top line was muted. The company generated just $0.7 million in gross profit on those revenues, suggesting that the business it is managing to find is of relatively low quality.
From a net income perspective, Ideanomics lost $12 million for the quarter. As a rule of thumb, it’s never a good sign when your operating loss is larger than your revenues.
Going forward, Ideanomics should report slightly better results, if for no other reason that it acquired another business that already has meaningful operating revenues. Still, the company will need to get much more organic growth to demonstrate that the business is a cohesive whole, rather than a collection of mostly-underwhelming parts.
IDEX Stock Verdict
Ideanomics has issued a lot of stock in recent quarters. That’s bad from a dilution standpoint, obviously. However, it’s also a positive in that Ideanomics has a good balance sheet. As of Jan. 15, the company had $190 million in cash. That will fund Ideanomics for a long time, given that it’s losing $10 million per quarter or so.
This means that Ideanomics has a long runway to try to get one or more of their businesses to commercial success. That said, I wouldn’t take a flyer on it at this point. I’d much rather own an EV company that is attacking one specific problem, such as batteries or charging technology, head-on, rather than doing a million things at once.
Maybe Ideanomics will prove me wrong. In general, though, companies that take on too many challenges simultaneously tend to underwhelm in execution on all of them.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.