If you looked away from the transformation of Naked Brand Group (NASDAQ:NAKD) in November, then you missed a bombshell. That’s saying a lot given what NAKD stock investors have been experiencing. Few clothing retail companies have undergone the turmoil this one has in the past two years — and with the pandemic’s impact on the retail landscape, that also is saying a lot. But the latest development is the most out of left field thing to happen to this penny stock and Reddit trader favorite, bar none. In November, Naked Brand announced the planned acquisition of Cenntro Automotive Group.
That’s right, Naked Brands has pivoted dramatically and will soon be an electric vehicle (EV) company. And not just any EV company; one that already has a proven lineup of commercial vehicles in production, sales in the order book, and bragging rights for having more of its commercial EVs in use by customers than any other manufacturer. NAKD stock remains a penny stock, making it perhaps the biggest bargain in the red-hot EV sector. Or it will be, assuming Naked shareholders approve the acquisition at a Dec. 21 meeting.
Naked Brands Wants to Be an EV Company
Just a few years ago, Naked Brands was the owner of a number of brick and mortar clothing retail chains. In trouble before the pandemic, the company found itself shutting stores and selling off brands through 2020. In 2021, it was focused on online sales by its Frederick’s of Hollywood lingerie brand, while developing an e-commerce platform of its own. While all this was going on, NAKD stock faced the threat of de-listing and became a meme stock.
In a move that no one could possibly have seen coming, on Nov. 8, Naked Brands announced its planned acquisition of Cenntro.
The all-stock deal will see Naked Brands change its name to Cenntro, but keep the NAKD ticker. It makes some sense that Naked Brands would do this. But why would Cenntro agree to the deal? Naked Brands has a cash war chest and is already a publicly traded company. Cenntro is essentially using the deal as a shortcut to going public. The company said as much in the news release:
“We came to believe that Naked allowed us to go public faster, providing the working capital to support our substantial backlog.”
NAKD stock popped on the news, soon hitting a two-month high — but still remaining a penny stock.
Is Cenntro the Real Deal?
Investors who follow the EV industry have learned to be a little gun shy. There are a lot of EV companies (including publicly traded EV makers) that have never actually built or delivered a vehicle. A lot can happen between prototype and production. With Cenntro, that’s not a concern.
The acquisition press release included the information that Cenntro has already “produced and delivered over 3,300 commercial electric vehicles.” The company is expecting revenue of $25.3 million on sales of 1,500 units in 2021 (many of these vehicles are small units used by municipal fleets). With a growing order list (the latest was an order for 2,000 of its Metro EVs in Japan), Cenntro projects it is on track for revenue of $2.1 billion in 2023.
Bottom Line on NAKD Stock
The last time I wrote about NAKD stock was near the start of August. Shares were trading for 53 cents — about what they’re worth today, although there was a heck of a lot of drama and movement between then and now.
At the time, NAKD was a “B” rated stock in Portfolio Grader. I wrote that its combination of penny stock value and long-term potential made it worth considering, at least for those investors who aren’t afraid of some short-term volatility.
Fast forward to now. The equation has changed.
Today, that 53 cents isn’t a bet on the ability of a flailing clothing retailer to focus on e-commerce intimate wear sales while trying to develop some sort of AI-driven, disruptive, online sales platform. Instead, it’s a bet on a top commercial EV manufacturer in a market for delivery vehicles that’s set to explode. Plug in the numbers, and NAKD stock has also moved up to an “A” rating in Portfolio Grader.
There is still bound to be some volatility around this company, especially in the lead-up to the Dec. 21 shareholder meeting. There’s also the possibility — however unlikely — that Naked Brand shareholders will turn down the proposed acquisition.
My take on the situation is that you have an unprecedented opportunity to snap up shares in a fully operational EV company at penny stock prices.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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