Specializing in light-duty electric vehicles, Ayro (NASDAQ:AYRO) seemingly fills a very relevant niche. Obviously, EVs are now all the rage, with Tesla (NASDAQ:TSLA) experiencing a wave of competition. But Ayro is different, instead focusing on compact, purpose-built vehicles for transportation of people and equipment, usually within a defined campus area. Naturally, AYRO stock has attracted buyers who have only read the company’s marketing materials.
But look beneath the surface and you’ll soon realize that this is nothing more than a classic pump-and-dump scheme. For starters, this EV maker has very little in the way of objective news and robust analysis. And there’s a reason for that. Unlike other promising small-capitalization opportunities, AYRO stock has little proven track record to support its investment thesis.
Thus, I’m not a big fan of the hype surrounding the company. In an age where platforms like Robinhood have given more people exposure to the markets, few consider the cons of such access. By looking at AYRO stock and seeing its price fluctuate from exhilarating highs to devastating lows off little news, you can easily discern that emotion is the main catalyst.
Further, the investor community that supports this scheme is buying shares off the wrong framework. At this point, no one should be excited about an EV company merely because it’s an EV company. As you well know, Tesla has already proven the concept. Today, if you want to compete, you must bring practicality — as in execution — to the table.
But without a track record to assess, you’re just taking a shot in the dark. That’s not investing. Instead, this is the definition of a gamble.
Long-Term Challenges Await AYRO Stock
Still, I understand why people, especially younger investors, are so attracted to AYRO stock. On paper, the company appears to have a viable and relevant business strategy. Particularly, demand for clean-energy vehicles has skyrocketed in recent years. Further, this demand is strongest among Ayro’s key consumer industries. According to its website, they are:
- Corporate campuses
- Hotels and resorts
- Food, beverage and retail
Sounds good so far. However, the novel coronavirus pandemic has severely disrupted all of these business segments. For instance, rising Covid-19 cases have impacted the travel industry. Even now, air travel is down to about a quarter of what it was last year. Logically, this undercuts hotels and resorts.
Under normal economic conditions, Ayro’s electric, three-wheel delivery vehicle called the “311” may interest restaurants and food-delivery services. However, thanks to companies like Uber (NYSE:UBER) and Grubhub (NYSE:GRUB), the eatery sector doesn’t lack delivery options. Rather, it needs demand to pick up to justify companies making a wholesale switch to EVs.
Arguably, once the coronavirus fades, many industries will be in recovery mode. At that point, they may be interested in Ayro’s solutions. However, one of the biggest challenges for AYRO stock is the longer-term threat of the new normal. At least two of Ayro’s target consumers may incur an unfavorable paradigm shift.
First, traditional colleges and universities may have trouble recruiting students from here on out. It’s not just about the health threat. Instead, the rising cost of higher education may deter prospective students.
And this segues into corporate campuses. With the immediate implementation of remote work, many businesses are eyeballing downsizing their physical footprint to save costs. If so, why would they buy EVs?
A Disruptor Vulnerable to Disruption
Interestingly, Ayro has a partnership with Circuit of the Americas (COTA), a world-class motor racing circuit. Located in Austin, Texas, it hosts the Formula 1 U.S. Grand Prix. In any other time, the record-breaking crowds at COTA for F1’s annual visits could serve as a catalyst for AYRO stock.
However, the coronavirus changed those plans. For the first time in the elite motor racing sport’s history, there will be no races held in the Americas. That’s a shame, in part because COTA enjoyed record ticket sales prior to the event.
But it’s also a reminder that AYRO stock is a dangerous gamble for the uninitiated. Unlike other quality companies, the pandemic knocked out Ayro’s revenue channels like dominoes. Given the present uncertainty, this is not the kind of business you want to spend any time on.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.