Ideanomics Still Looks Really Compelling as a Bet on EV Growth

Some electric vehicle investors may rejoice after Ideanomics (NASDAQ:IDEX) posted its full-year 2020 results. The company posted strong numbers, including accelerating revenue. This lays the groundwork for IDEX stock upside in 2021 as the EV charging infrastructure expands.

Image of a grey electric vehicle plugged in at a charging station.
Source: Videomatic/Shutterstock.com

Speculators may treat IDEX stock as a lotto pick, but in a few years the company’s industry disruption may pay off in two ways: Ideanomics Mobility and Ideanomics Capital.

Ideanomics Mobility will prosper from global EV market growth. It will do so by investing in the three pillars of EV enablement: vehicles, charging and energy.

Shared services within the Mobility unit will result in commercial fleet electrification. To increase its margins, IDEX has a strategy in finding synergy among its portfolio. For example, Treeletric, a subsidiary in Malaysia, received a purchase order from an Indonesian bike distributor. IDEX will fulfill the 10,000 unit service order.

IDEX’s Energica motorcycle investment introduces battery and charging technology to its portfolio. So, Treelectric may apply the battery and charging equipment in its product. This will drive revenue as early as the second half of the year.

A Closer Look at IDEX Stock

The charging and battery systems are central to the company’s Sales 2 Financing 2 Charging model. It serves three market segments through three brands: Medici Motor Works, Treeletric and Solectrac.

Ideanomics improves its products’ affordability by helping customers with financing. In the charging and energy services, IDEX sells WAVE wireless charging products. WAVE is the inductive charging business it bought in January.

Revenue from the acquisition may potentially accelerate this year. On the conference call, Chief Executive Officer Alfred Poor hinted that Antelope Valley Transit Authority is a potentially bigger customer in the quarters ahead.

IDEX China and Other Opportunities

Ideanomics acknowledged the under-performance in its China operations. Poor said recent management changes, including a new general manager for China, plus investing in the sales, business development and supply chain team should improve results.

“Our presence in China over the last few years has created deep knowledge of the logistics and supply chain requirements for the manufacturer of EVs, batteries, and related components,” Poor said.

Ideanomics appears to have more opportunities than the typical EV automotive company. For example, Energica is a 100% electric high-performance motorcycle; Solectrac is an EV targeting the underserved agriculture market. So, while EV cars and SUVs get crowded, Ideanomics is building a niche.

In the last fiscal year, IDEX accumulated $165.76 million in cash and cash equivalents. Revenue rose sharply, offset by the cost of revenue from third parties. Still, expenses for the year fell from $111.68 million to $88.63 million.

The company took a non-cash expense charge of $42.6 million in 2020, compared to $73.4 million. This move will improve the long-term value of the business.

Fair Value

IDEX scores poorly on value.
Click to Enlarge
Source: Chart courtesy of StockRover.com

In the table, the poor value score reflects the level of speculation in the share price.

Markets are betting on strong EV sales in the future. The stock’s price-to-sales ratio is 35.7 times. By comparison, the industry trades at below 10 times sales. The S&P 500’s price-to-sales is only 3 times.

IDEX shares may continue trading at high valuations so long as the market is willing to bet on a boom in the EV sector.

Sentiment may shift without notice. Once companies spend the government infrastructure grants, they may ask for more.

The U.S. government is in the early phases of supporting clean energy programs. Investors may gain exposure to the charging infrastructure expansion, battery-electric motorcycle market and EV in public transit (through Antelope Valley Transit Authority) by considering Ideanomics.

Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.


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