Even as Tailwinds Seem to Have Appeared, Take a Pass on IDEX Stock

Despite top-line improvements at Ideanomics (NASDAQ:IDEX) in recent quarters and positive momentum in its electric vehicle division, IDEX stock remains a hold at best.

Depth of field shot of an electric vehicle being charged.

Source: Shutterstock

I will say that the company does look to be carving out a clearer image of what it will become. Revenues are clearly moving toward its EV division. 

However, we have to rely on broad indicators such as profits with a somewhat amorphous company like Ideanomics. And based on that among other things, I wouldn’t invest now. 

Ideanomics has at least two things going for it. For one thing, it has increased revenues over the past year based on Q3 earnings summaries. In Q3 of 2019 Ideanomics posted revenues of $3.1 million. These revenues jumped to $10.6 million during the same period in 2020.

For another thing, IDEX stock is appreciating. Since the beginning of October, it has risen from under a dollar to around $4.50. No matter the knocks against the company, that is an increase of 387.9% during the period.

However, I’d argue that neither the increasing revenues nor the price increase mean very much.  

A Closer Look at IDEX Stock

In Q3 of 2019, when revenues reached $3.1 million, profits hit $2.9 million. A year later revenues hit $10.6 million but profit dropped to $700,000. The point here is that an increase in revenue is good, but profitability is arguably more important. 

That’s also why I’m not that impressed by the price appreciation in the stock. It seems to be a consequence of hype surrounding Ideanomics’ association with trendy sectors rather than something substantiated by cold, hard quantifiable results.

Ideanomics is broadly divided into two divisions, Ideanomics Mobility and Ideanomics Capital. The Mobility division deals with multiple electric vehicle businesses while the Capital division touches on real estate titling, trading, and other fintech. Succinctly, I’d describe it as a business with a lot going on, but lacking depth and focus. 

Also, the Mobility division is by far the more important of the two at present. The division, which the company also refers to as the Mobility Energy Global (MEG), produced $10.1 million of the $10.6 in recorded revenues during Q3 of 2020. 

Recent Sales and Deliveries 

Ideanomics has been gaining momentum in a portion of the MEG division. 

The company recorded 151 vehicle deliveries during November. All 151 deliveries were for the taxi/ride-hailing segment. That number increased to 439 during December, 356 of which were delivered to the taxi/ride-hailing segment. 

At the very end of 2020, Ideanomics announced a deal for the purchase of 2,000 units of BYD’s D1 electric ride-hailing vehicle. The company will purchase the 2,000 units which will then be delivered to various Chinese cities in the first half of 2021.  

The details of the 8-K filed in relation to the agreement don’t specify how much Ideanomics invested in the deal nor how much they might potentially stand to make in return. 

So, in my mind, the takeaway here is that this deal is overall positive despite the fact that we as outside investors have little in the way of details. The sheer size of the order bodes well for Ideanomics. 

The Ideanomics Stock Verdict

IDEX stock still looks like a no-go to me. It remains too speculative despite all of the momentum and positives I mentioned above. Q1 earnings will tell a clearer story, and we will know more about how its top and bottom line have been affected by recent wins. Maybe then there will be a clearer narrative for buying, but not now.

The company has too much going on now but if it can leverage financing wins in its favor maybe it will become attractive at a later date.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

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