Today’s price action has generally followed yesterday’s, with many parts of the market seeing green again. However, the electric vehicle (EV) sector has been a standout this week, with shares of major EV players seeing strong buying pressure. Phoenix Motor (NASDAQ:PEV) is feeling this upside momentum in particular, with PEV stock more than doubling at one point today.
Interestingly, this move comes on little news. Phoenix Motor, a manufacturer of electric vehicles and electric drive systems used in EVs, was recently listed two weeks ago. However, today’s surge has taken PEV stock to a new all-time high.
Now, following a given stock’s listing, volatility is typical as investors attempt to place a fair value on the company. In the case of EV stocks, this is perhaps more difficult to do. That’s because many such companies are not yet profitable. Accordingly, forward-looking assumptions are necessary for investors to work their valuation models, as is the case with Phoenix Motor.
Let’s dive into what might be behind today’s move for PEV stock.
Why Is PEV Stock Doubling Today?
Phoenix Motor does have some rather intriguing developments that investors have been watching. Earlier this month, the company raised nearly $16 million from its public offering. That capital is expected to be put to good use, as Phoenix Motor ramps up its manufacturing capabilities.
The extent to which investors are pricing in a faster ramp-up due to this capital infusion remains to be seen. However, there are some clear benefits from the public listing. The ability for shareholders to cash out — and for the company to raise money in the future — are positives, especially for such a capital-intensive business.
The timing of the listing is also interesting. It’s not necessarily a great time for companies to go public, with investors factoring in much lower valuations. Because of that, Phoenix Motor may believe it’s better-positioned to succeed long-term than peers. Time will tell.
The fact the entire EV sector is seeing newfound interest is probably the key driver behind PEV stock today. As a higher-leverage play, investors in the stock have amplified exposure to trends (both good and bad) in the EV space. Right now, that’s a good thing. However, as we’ve seen before, momentum can be cruel to investors.
On the date of publication, Chris MacDonald 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.
