Gogoro Stock Is Worth a Look Following Its Post-Debut Slump

  • Gogoro (GGR), a Taiwan-based battery swapping company, began trading in the U.S. on April 5.
  • Not too long after its debut, shares tanked, as investors bailed following news of emerging competition.
  • Nevertheless, investors interested in EV plays should consider GGR stock, as the market has possibly overreacted to this news.
A close-up shot of the back of a Gogoro (GGR) scooter.
Source: Seika Chujo / Shutterstock.com

Special purpose acquisition companies (SPACs) are no longer the hottest thing on Wall Street. Many companies, however, continue to go public via SPAC mergers. A recent example is Gogoro (NASDAQ:GGR). It began trading on the NASDAQ Exchange in early April. We’ve seen plenty of SPAC plays slump post-merger. With GGR stock though, the slump arrived fairly quickly.

Shares in this battery swapping company began to plunge less than a week after their first day of trading. The reason? News of big names in the two-wheeled vehicle space teaming up to launch their own rival battery swap service. The market views this a potential “game over” moment. That’s why shares have given back their deSPACing gains, and then some.

Even so, it’s possible the market has overreacted. There are other factors that suggest it can withstand this emerging competition. Instead of following the crowd’s lead, you may want to instead take advantage of its recent weakness.

GGR Gogoro $5.90

GGR Stock at a Glance

Based in Taiwan, Gogoro is not a household name in the U.S. But in its home market, as well as major markets in Asia, it has made a name for itself as a provider of battery swapping services, for electric two-wheeled vehicles like mopeds, motorcycles, and scooters. Founded in 2011, this is no electric vehicle (EV) startup. In fact, it’s on track to generate around $500 million in revenue this year.

Looking to raise more capital, the company inked a deal with SPAC Poema Global Holdings last September, with the merger closing on April 5. In the lead up to the deal closing, and immediately after, GGR stock soared for around $10, to as much as $17.59 per share. Unfortunately, this big rally proved to be short-lived. Its shares began to reverse, when headlines emerged about a new battery-swapping competitor.

The competitor? Gachaco, a joint venture between Japan’s “big four” motorcycle manufacturers (Honda, Yamaha, Suzuki, Kawasaki). Given the size and reputation of these firms, I can understand why so many view it as a massive threat. Still, I wouldn’t assume Gachaco is set to become a “Gogoro killer.”

Why Gogoro Could Keep This New Competition at Bay

Again, investors today are viewing the launch of Gachaco as a “game over” moment for GGR stock. That’s why the stock is down over 60% since its debut. Concerns are rising that this connected competitor will limit its future growth, as well as possibly grab a large chunk of its existing business.

This may be the takeaway, if you only look at the situation from the surface. Take a closer look, though. You’ll start to find things that counter the view that Gachaco will quickly drive it out of business. For starters, Gachaco for now is only starting to set up operations in its home market of Japan. It is far away from branching into Asian markets.

Also, Gogoro has a first-mover advantage. A product of this is that the company has developed its own partnerships with major companies. As InvestorPlace’s Larry Ramer has discussed in recent coverage of the stock, one partner/backer of note is Foxconn. Along with Foxconn, Gachaco has partnerships with other two-wheeled vehicle makers throughout Asia.

Put it all together, and you can make the argument that it can keep this new competition at bay. The market has jumped to conclusions when it comes to the launch of Gachaco.

The Verdict

While its newly-minted rival is just getting started, this company is on track to hit $500 million in revenue. By the time Gachaco’s backers expand it outside Japan, Gogoro may be lightyears ahead. This could be a $1.7 billion per year business by 2024. Not to mention, a $1.7 billion per year business with moderately high operating margins. Future results could enable it to re-hit its past high, and hit new highs, in the years ahead.

Whether or not Gachaco is a threat, the company still needs to deliver. Only time will tell whether its expansion into China, India, and Southeast Asia will result in it becoming a billion-dollar business in less than two years.

Nevertheless, it’s possible the market is reading too much into the launch of Gachaco. Risk/return may be heavily in your favor at today’s prices. If you’re interested in EV-related plays, you may want to consider GGR stock.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.


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