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Lucid Dreaming of EV Crown; How about Investors?

Electric Vehicle (EV) player Lucid Group (LCID) is grabbing the spotlight lately for various reasons. After going public in July upon merging with acquisition…

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Electric Vehicle (EV) player Lucid Group (LCID) is grabbing the spotlight lately for various reasons. After going public in July upon merging with acquisition company Churchill Capital, the upstart automaker hasn’t released any cars yet, but has made dreamy promises about producing environmentally-friendly luxury vehicles without compromising on performance and technology.

Notably, the company claims that the preliminary versions of its cars so far demonstrate what was promised. There are many aspects to the company that keep me bullish on its prospects, and I have tried to put them together in this article. (See Lucid stock chart on TipRanks)

Financial Strength and Encouraging Pipeline

One of the most important positives for the company is that it is free of any long-term debt or any other liabilities, which will not only smooth the process of maintaining a net-cash position but will also help the company pursue growth-driving initiatives like acquisitions and technology innovations.

Also, recently, Lucid announced cashless redemption of all of its outstanding public warrants, which will mitigate shareholder dilution, as assured by the company. Such action not only reflects a strong balance sheet but also helps increase investor confidence in the company, in turn boosting the share value of the company’s stock.

Moreover, a strong pipeline of EVs is another shining star on the list of Lucid’s credentials. Its first car, the Lucid Air, is set to hit the market by the end of this year, and is already enjoying significant clout in the EV consumer market. Moreover, the company will start production of its first SUV, Project Gravity, in 2023.

Lucid Air: a Tailwind

Come September 27, Lucid will invite select guests to its manufacturing unit at Casa Grande, Arizona, to take a tour of the manufacturing processes and test drive the Lucid Air. Reportedly, the car will have a driving range of about 500 miles, which is notably higher than Tesla's (TSLA) Model S Long range of 412 miles.

This move also demonstrates that the company is keeping its word about starting to bring its cars to the market this year.

Additionally, the launch of Lucid Air is a result of a decade of research and design testing leveraging compelling technology and batteries which also have been extensively tested to deliver optimal performance.

Again, the Dream Edition of the Lucid Air has already been sold out to pre-bookings. This reflects the strong customer interest it has garnered even before it has released its cars in the market.

If the week-long demonstration program is successful, you might not find the Lucid stocks so cheap by the end of the month.

Why Hasn't the Stock Performed Well, So Far?

The EV market has recently undergone a correction, reflecting investor’s dilemma regarding dwindling EV production thanks to semiconductor shortages. This has affected EV players throughout the industry as a whole, affecting their stock prices.

Moreover, in August, a lockup period for institutional investors expired, allowing them to sell their stake in Lucid, which added to the stock’s woes.

Again, many investors are not clear about the impacts of the cashless redemption of public warrants recently announced by the company, despite the company backing their decision with an explanation. Thus, the announcement has not been able to create any impact on the stock value and has even led to some level of confusion sell-offs.

Do the Positives Outweigh the Negatives?

However, the positives seem to win on a micro, as well as macro level. Several big tech heavyweights are aiming to reach carbon neutrality, which is expected to drive demand for EVs once the supply issues ease. According to Facts and Factors, citing a Globenewswire article, the global EV market is expected to reach $700 billion by 2026, witnessing a CAGR of 22% between 2021 and 2026. 

Drawbacks also did not deter Citigroup analyst Itay Michaeli from initiating coverage on Lucid with a Buy rating and a $28 price target, earlier this month. Based on his Buy rating, the consensus rating for the stock is a Moderate Buy. The average Lucid price target of $28 indicates 38.6% upside potential from the current level.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

The post Lucid Dreaming of EV Crown; How about Investors? appeared first on TipRanks Financial Blog.

Energy & Critical Metals

SSE Renewables and Microsoft launch puffin monitoring pilot

UK energy company, SSE Renewables has launched the Flying Squad initiative to monitor and protect puffins around the Scottish coastline.
The post SSE…

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UK energy company SSE Renewables has launched the Flying Squad initiative to monitor and protect puffins around the Scottish coastline.

The initiative will see the energy company team up with Microsoft, tech firm Avanade and NatureScot to monitor puffin numbers.

The technology used for the initiative has recently been tested during the seabird’s breeding season on the Isle of May in the Firth of Forth.

Four cameras in position on the island gathered footage and automatically detected and counted the birds until they recently left the island.

Simon Turner, CTO, Data & AI, at Avanade: “As the investment in renewable energy continues, it’s even more important to ensure that developments, like wind farms, are not having any detrimental environmental effects.

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“With SSE Renewables, we saw an opportunity to use camera and AI technology to more accurately and efficiently, and less invasively monitor the wellbeing and breeding habits of the puffins that are attracted to this particular area on the Isle of May.”

If successful it is expected the technology will be used for a number of species recognition projects around SSE sites including hydropower stations and wind farms.

Rachel McEwen, SSE’s Chief Sustainability Officer, said: “…Our assets can have far-reaching consequences across a wide range of issues, from reducing the effects of global climate change to supporting local habitats.

“The impacts of our hydro and wind farm operations and our transmission and distribution networks need to be actively managed and what initiatives like the Flying Squad show is that there are also incredible opportunities to be had in protecting and enhancing existing and new habitats as we harness natural resources such as water and wind for renewable energy generation.”

James Scobie from SSE’s Flying Squad. Credit: SSE

James Scobie from the Flying Squad said: “The implications for the Microsoft/Avanade technology are huge. It’s our ultimate aspiration that this incredible cutting-edge technology could be deployed in a variety of different settings to monitor species of interest in the future.”

Erica Knott, NatureScot Marine Sustainability Manager said: “There are exciting possibilities for further development, for example, to track activity at individual breeding burrows or overcome some of the trickier aspects of seabird monitoring, such as remoteness and weather, at other sites.

“This would enhance our understanding of seabird populations and their interactions with human activities, helping us to advise on the future management and monitoring of marine developments, in particular, to secure renewable energy to address climate change while also safeguarding biodiversity.”

Recently, SSE and Microsoft signed a memorandum of understanding (MOU), establishing a Sustainability Partnership between the companies, to develop and deploy innovation projects aligned to the zero carbon emissions ambition of both companies.

The MOU represents SSE and Microsoft’s commitment to working together on several future initiatives, to promote the awareness of business challenges and opportunities around sustainability, technology, and digital innovation.

The post SSE Renewables and Microsoft launch puffin monitoring pilot appeared first on Power Engineering International.

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Energy & Critical Metals

Evergrande Auto Hasn’t Sold A Single Car, But Has Enriched Its Founder And His Friends Plenty

Evergrande Auto Hasn’t Sold A Single Car, But Has Enriched Its Founder And His Friends Plenty

While everyone has been focusing on Evergrande…

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Evergrande Auto Hasn't Sold A Single Car, But Has Enriched Its Founder And His Friends Plenty

While everyone has been focusing on Evergrande as a property developer, few know the story about how Evergrande Auto became worth $86.6 billion at one point without selling a single car. The company now trades at a fraction, about 4%, of its all time high. While shareholders were wiped out for the most part, insiders made out well. 

On Tuesday of this week, the company did what it does best. No, not make vehicles: pay insiders. Evergrande Auto "granted 323.72 million share options worth HK$1.26 billion to three directors and around 3,180 employees of the company," a new report from Caixin notes.

Founder Hui Ka Yan and "friends" in his circle have made out the best from the fallen company. How well have they done? One "friend" of the founder bought 80 million shares in the company before it was renamed as Evergrande Auto for HK$0.30 each. They then sold them all for HK$50 per share, netting the friend more than HK$4 billion.

Hey, it's great work if you can get it. 

Caixin reports that the primary purpose of Evergrande Auto was to raise capital for the group company Evergrande. While the parent company claimed it was investing some 47 billion yuan into the auto company, analysts are starting to wonder if the market funded these investments instead. 

One analyst told Caixin: “Evergrande Auto had raised 30 billion yuan in two rounds, which means that the company mostly used investors’ money — instead of its own capital — to invest, and it managed to gain a high market value (for the auto company). Consequently, with its shares (in the auto company) at high price, it could use them as collateral to raise even more money.”

The company focused more on M&A than it did on making cars, the report says. For example, it bought a major stake in Xinjiang Guanghui Industry Investment Group Co. Ltd. for 14.5 billion yuan in 2018. As Caixin notes, that company is a stakeholder in China Grand Automotive Services Group Co. Ltd., which is one of the largest auto dealers in the country.

The stake was later sold off in 2019 when Evergrande needed cash. 

In 2019, Evergrande Auto's predecessor bought a 51% stake in National Electric Vehicle Sweden AB (NEVS) for $930 million, the report notes. Evergrande's stock price rose as a result. 

Part of the mechanics that helped Evergrande Auto's predecessor rocket higher included the fact that 18 shareholders owned 19.83% of the company's shares. When combined with the 74.99% of the issued shares held by the company, that only left 5.18% of Evergrande shares to be traded freely. 

Evergrande also acquired a 51% equity stake in Fangchebao Group Co. Ltd. using its shares. Fangchebao then brought in 17 investors in March 2021 that helped it raise capital at a valuation of HK$163.5 billion. Evergrande made HK$8.175 billion upon selling its shares.

Analysts, however, were baffled as to how Evergrande was able to bring in investors at the elevated valuation. The secret lied in a promise of a buyback from Evergrande.

One investor told Caixin: “What we valued was its valuation adjustment mechanism (对赌协议). If Fangchebao failed to go public within a year, Evergrande would buy back our shares at a 15% premium to the prevailing market price. At least, through this mechanism, we could get out money back.”

Those investors thought Evergrande could continue to push up Fangchebao's valuation and that Evergrande wouldn't fail within a year.

Another investor said: "However, Fangchebao was a relatively poor quality company, much worse than Evergrande Property Services. In Fangchebao’s case, it was better not to go public. It would be more troublesome after the listing because its poor performance would become public knowledge.”

Then there's the question of who truly benefitted from Evergrande's financial wheeling and dealing over the years. While investors and shareholders now suffer the consequences of the company's poor decision making, Hui Ka Yan's personal assets are now mysteriously being "transferred to new ownership", the report says. In fact, Hui was easily the single biggest beneficiary of the dividends paid by Evergrande from 2011 to 2020. 53 billion yuan of the 69 billion yuan that Evergrande has paid in dividends since it listed have gone to Hui.

You can read Caixin's detailed report here

Tyler Durden Thu, 09/23/2021 - 19:20
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Energy & Critical Metals

Why Nio Stock Needs Some Help When It Comes to the Charts

The electric vehicle (EV) trade has finally cooled off, which is a good thing given how far it had run. It would be hard for Tesla (NASDAQ:TSLA) to justify…

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The electric vehicle (EV) trade has finally cooled off, which is a good thing given how far it had run. It would be hard for Tesla (NASDAQ:TSLA) to justify a trillion dollar market capitalization or for these revenue-less SPAC stocks to keep soaring higher. Meanwhile, Nio (NYSE:NIO) is somewhere in between, with NIO stock performing quite well but not exactly on Tesla’s level.

Source: Robert Way / Shutterstock.com

At least, not yet.

In order to get there, the company will need to continue its domestic expansion in China and work on expanding globally. Tesla has been trading pretty well lately as it works on consolidating its massive gains over the last 18 months.

For Nio, though, the charts aren’t all that great right now. Combined with a high valuation, that has me on guard with the stock. For Nio, it needs the technicals to work in its favor in order for the stock to be attractive.

Trading Nio Stock

Daily chart of Nio stock
Click to Enlarge
Source: Chart courtesy of TrendSpider

A look at the chart highlights the recent struggles for Nio stock. Shares bottomed in early May along with most other growth stocks, as the bear market in this group came to end.

Nio ripped back toward $55 and the 61.8% retracement, but ultimately failed to hold those gains. It later failed to hold its major moving averages, while giving us an “ABC” correction down to the weekly VWAP measure.

This measure had been decent support throughout 2021.

However, after its rally back to the 21-day and 21-week moving averages, NIO stock gave us the “D” leg of that correction, resulting in the recent flush lower. We now see the stock below the weekly VWAP reading, as bulls scramble to see whether Nio can find its footing

If it can, we need to see Nio stock reclaim the August low at $36.24, as well as the weekly VWAP level. As of now, it’s currently undergoing a “monthly-down rotation” so long as it’s below $36.24. Back above those measures, and the high $30s could be in play.

On the downside, though, it’s possible we see the $31 to $32 area again. This area has been support twice amid two nasty corrections in Nio stock this year.

As a whole, Nio stock has been a leader amid growth stocks when the group is hot. But it has not done too well lately and it shows on the charts. So if the overall market struggles, this stock may too.

Breaking Down Nio

So many people will point to the fundamentals of a company like Nio without taking into consideration the valuation. Granted, I don’t put a lot of weight in the valuation either. At one point, valuations played a much larger role in the way that stocks behaved.

However, I think a few things have altered some of that Benjamin Graham thinking.

First, tech stocks blew the market wide open. No longer were companies having to follow traditional paths with only decent margins. Now software companies can routinely generate massive profit margins, while the tangible addressable markets (TAM) are significantly larger.

That’s allowed valuations to expand as well.

Second, the Fed’s low-rate and easy-money policies have forced investors to plow funds into equities. The returns in bonds (particularly internationally) and fixed income have dried up, forcing investors to chase returns in growth stocks — like Nio.

Is it healthy? Not necessarily, but this has been our reality for quite some time and it will likely remain that way for the foreseeable future.

I’m not calling for some great reckoning. A stock like Nio can continue to go up as long as it continues to deliver. But that remains a question mark.

While the company reported solid quarterly results last month, Nio’s July and August monthly auto deliveries disappointed investors. Furthermore, Nio was forced to trim its third-quarter delivery expectations.

Throw in Nio’s plan to raise $2 billion in stock, and it creates even more pressure on the stock price.

The Bottom Line on NIO Stock

It’s not that I have any specific gripe against Nio, but the facts are simple. For an automaker, the stock commands a high valuation and the company doesn’t have enough momentum in its underlying business right now. Thus, we need to see beat-and-raise quarters and delivery results in order to spur the stock higher. In line and disappointing results aren’t going to cut it.

Second, the charts don’t look very good. Back above $36.25 and my tone will change a bit. Otherwise, I remain defensive on Nio stock for the time being.

On the date of publication, Bret Kenwell did not have (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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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