Electric vehicles (EVs) and fintech are some of the hottest sectors out there. So, it’s no shock that Ideanomics (NASDAQ:IDEX), which dabbles in both fast-growing areas, has become a popular name to trade among retail investors. Looking beyond the hype, though, there’s little on the table to justify the IDEX stock valuation of $4.75 per share.
As it stands now, Ideanomics sports a nearly $2 billion market capitalization. Yet, its sales in the past twelve months were only around $15.8 million. Admittedly, “meme stocks” like this one aren’t valued on current results. Investors buying this are betting that it stumbles upon success in either fast-growing industry.
The thing is, Ideanomics doesn’t hold a candle to names like Square (NYSE:SQ) when it comes to fintech. It may find some success with EVs. Yet, it’s hardly the next Tesla (NASDAQ:TSLA). Instead, consider this company a “jack of all trends, disruptor of none.”
In essence, your garden variety penny stock. Cynically chasing the latest “hot trend,” and cashing in on the misplaced optimism of investors. In the near-term, some may have the opportunity to make quick profits trading this stock, but its long-term performance tells a different story.
Prone to spiking fast, then pulling back completely, this isn’t a long-term compounder in the making. Putting it simply, if you are bullish on either fintech or EVs, you have better investment options out there.
IDEX Stock Isn’t the Latest, Greatest EV Play
Ideanomics is aggressively building up its portfolio of EV-related businesses and investments. These include an EV charging business in the U.S. (WAVE), an EV manufacturer in Malaysia (Treeletrik), and an EV sales/financing business in China (Mobile Energy Global).
While it’s made the electric vehicle its main focus lately, the company is still highly active in fintech through its Ideanomics Capital unit. A few years back, the company was involved in crypto but has since phased this segment out.
Some investors may see the variety of megatrend exposure here as a positive. As our own Matt McCall discussed, though, the company’s history of quickly pivoting in and out of “hot” industries could be a red flag.
How so? In the past five years, this company has pivoted from streaming to green energy, to crypto, to fintech, and now, to the EV sector. It’s thrown many darts at the board but hasn’t achieved much success in any of its pursuits.
Chances are, actual success in these endeavors isn’t the company’s main motive. Instead, like a lot of speculative penny stocks, Ideanomics is just taking advantage of trends in order to drum up its share price.
It’s just as likely;y as not they do it merely to raise capital. As InvestorPlace’s Mark Hake wrote, it raised quite a bit from equity sales last year. With shares up 67.5% in the past month, chances are it’s getting ready to do so once again. The heavy dilution from subsequent share sales will minimize potential gains from its success (if any) in the EV and fintech industries.
Nevertheless, while shares will eventually sell-off (as they’ve done historically), one factor could inadvertently give the stock more runway.
A Short Squeeze May Be Possible
We’re all tired of hearing about last month’s “short-squeeze saga,” but, while it’s now largely over, continued retail speculation in stocks (with little regard to fundamentals) could result in future unjustified rallies.
As of the end of January, short interest in the stock (11% of float) wasn’t extremely high. After what happened last month, short-sellers may be a bit more cautious before betting against overvalued-yet-popular stocks. But, as shares approach $5 per share, some bears may be tempted to fade this “all sizzle, no steak” name.
In 2020, prominent short-sellers like Hindenburg Research published scathing “short reports” about the company. With IDEX stock now more getting more out of hand, we could see a repeat of this. This may work in the bear’s favor, just like it did before the recent madness.
When a prominent short-seller issues a report shares can sell-off by double-digits right away. Or, it could go the other way. Future short reports fan the flames, spurring retail traders on WallStreetBets and other platforms to buy at any price, and hold with “diamond hands.”
I’m not saying this will result in a move from, say, $5 per share up to $20 per share. But, as stocks continue to trade on hype rather than substance, IDEX stock could continue to trend higher.
The Bottom Line on IDEX Stock
Ideanomics looks ridiculously priced now. but we could see its upward trajectory continue due to the quirks in today’s stock market environment. This may make a worthwhile near-term trade.
But, is IDEX stock a worthwhile long-term play on multiple megatrends? Don’t bet on it.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.