For the fourth quarter and full-year 2022, global fintech company Ideanomics, Inc. (IDEX) reported disappointing top-to-bottom line results. Furthermore, analysts seem bearish about the company’s near-term prospects as it grapples with various headwinds, including high inflation, supply chain issues, stiff competition, and rising interest rates.
Despite seeing tons of high volume this week, IDEX should be best avoided now, given its weak fundamentals and grim outlook. In this article, I will discuss several reasons why I am bearish on this tech stock.
With a $35.97 million market cap, IDEX, through its subsidiaries, develops zero-emission mobility solutions for the off-highway and on-highway commercial vehicle markets internationally. The company operates through three segments: Ideanomics Mobility; Ideanomics Energy; and Ideanomics Capital.
On May 8, IDEX announced that its subsidiary US Hybrid secured two large follow-on orders for electric propulsion systems that, separately, would be used in Department of Defense projects and to power specialty vehicles. These two orders, valued at approximately $6 million, are part of US Hybrid’s solid customer pipeline through the next 12-18 months, which might generate over $50 million in sales.
Also, on April 4, IDEX announced that its subsidiary Solectrac added eight certified dealerships with 14 locations in Florida, Texas, and California during the first quarter of 2023, continuing with the rapid expansion of its certified sales and dealer network.
These recent developments have resulted in a significant increase in investors’ interest in IDEX’s stock. Over the past ten days, the stock has traded at an average trading volume of 212.97 million.
However, shares of IDEX have plunged 83.5% over the past six months and 92.1% over the past year to close the last trading session at $0.04. IDEX’s stock price has been in a freefall over the past few months as concerns about the company’s fundamentals continue to grow. The stock hit a record low of $0.02 on April 28, 2023, which is 97.8% below the 52-week high of $0.89.
On April 20, IDEX was notified by the Listing Qualifications Staff of Nasdaq that the company did not meet the minimum closing bid price requirement of $1 for continued listing as outlined in Nasdaq Listing Rule 5550(a)(2).
IDEX has struggled significantly to gain traction as the company’s losses have mounted drastically. For the full-year 2022, the company reported a loss from operations of $292.53 million, while its net loss and loss per share came in at $282.12 million and $0.51, respectively. Also, IDEX’s top line has been affected, with total revenues dropping 11.5% year-over-year to $100.94 million.
IDEX’s cash burn is also a matter of concern. As of December 31, 2022, the company’s cash and cash equivalents came in at $21.93 million, compared to $269.86 million as of December 31, 2021.
Here are the factors that could affect IDEX’s performance in the upcoming months:
Disappointing Financials
For the fiscal year that ended December 31, 2022, IDEX’s total revenue decreased 11.5% year-over-year to $100.94 million. The company reported a gross loss of $815,000, compared to a gross profit of $23.23 million in the prior year. Its loss from operations widened 12.7% year-over-year to $292.53 million.
Furthermore, the company’s net loss attributable to common shareholders worsened by 9.9% year-over-year to $282.12 million, and its loss per share came in at $0.51. As of December 31, 2022, the company’s current assets stood at $114.03 million versus $362.51 million as of December 31, 2021.
Unfavorable Analyst Estimates
Analysts expect IDEX to report a loss per share of $0.04 for the first quarter that ended March 2023. In addition, the company’s loss per share for the fiscal years 2023 and 2024 are expected to come in at $0.24 and $0.10, respectively.
Poor Profitability
IDEX’s trailing-12-month gross profit margin of negative 0.81% compares to the industry average of 29.85%. And the stock’s trailing-12-month EBIT margin of negative 158.12% is significantly lower than the 9.64% industry average. Also, its trailing-12-month net income margin of negative 258.27% compares to the industry average of 6.40%.
Additionally, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 105.32%, 32.33%, and 107.37% are significantly lower than the industry averages of 13.64%, 6.95%, and 5.07%, respectively.
POWR Ratings Reflect Bleak Prospects
IDEX’s overall F rating translates to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. IDEX has an F grade for Quality, consistent with its lower-than-industry profitability. Also, the stock has a D grade for Stability. Its 24-month beta of 1.36 justifies its Stability grade.
The stock is ranked #146 among 152 stocks in the F-rated Software - Application industry.
Beyond what I have stated above, we have also given IDEX grades for Quality, Sentiment, Growth, and Momentum. Get all IDEX ratings here.
Bottom Line
IDEX reported disappointing financial results for the year that ended December 31, 2022. The company’s massive losses, declining market share, and risky cash position are adding concerns about its fundamentals. In addition, IDEX’s near-term prospects look bleak as it continues to struggle with various challenges, including inflation, rising interest rates, stiff competition, and supply chain disruptions.
Given IDEX’s weak fundamentals, low profitability, and weak growth outlook, this tech stock is best avoided now, despite its high-volume trading.
Stocks to Consider Instead of Ideanomics, Inc. (IDEX)
The odds of IDEX outperforming in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these three stocks rated A (Strong Buy) from the Software - Application industry instead:
Commvault Systems, Inc. (CVLT)
Xperi Inc. (XPER)
eGain Corporation (EGAN)
What To Do Next?
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IDEX shares were trading at $0.04 per share on Friday afternoon, down $0.00 (-5.92%). Year-to-date, IDEX has declined -75.61%, versus a 7.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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