Ideanomics is a buy, says Roth Capital Partners

Roth Capital Partners analyst Craig Irwin initiated coverage on Wednesday of Ideanomics (Ideanomics Stock Quote, Chart, News, Analysts, Financials NASDAQ:IDEX) with a “Buy” rating, saying IDEX should deliver 4x revenue growth in 2021.

Ideanomics has two business units in commercial electric vehicles and fintech, with its e-Mobility Group currently comprised of six businesses and Ideanomics Capital comprised of five businesses.

IDEX’s share price started picking up steam over the back end of 2020 and has jumped ahead in 2021, currently trading up 38 per cent year-to-date.

But Irwin thinks there’s more upside to come and has started off IDEX with a $7.00 price target, which at the time of publication represented a 12-month return of 158 per cent.

Calling Ideanomics a disruptive technology company, Irwin highlighted management’s take on working with a range of companies within the one portfolio.

“Ideanomics’ portfolio approach unites entrepreneurs at solid but early-stage companies with a capable team to gain synergies by cross-company sharing of resources. We believe this approach allows more effective business development, procurement leverage, internal sourcing versus expensive outsourcing, and technology solutions supplemented by efforts at other sister businesses. Examples include the incorporation of WAVE inductive charging solutions in Medici commercial electric vehicles slated for launch this year as well as the cross-portfolio procurement of battery packs,” Irwin said.

All told, the acquisitive Ideanomics has made 11 acquisitions and investments along with four divestitures over the past three years, with the more recent acquisitions predominantly coming to its eMobility ecosystem.

In E-Mobility, Ideanomics has assets in electric vehicle manufacturing companies Medici, Tree Technologies, Solectrac and Energica, in EV charging technology with WAVE and in commercial electric vehicle financing in the Mobility Energy Group.

In January, IDEX announced an agreement to acquire 100 per cent of WAVE (Wireless Advanced Vehicle Electrification), a Salt Lake City-based provider of inductive charging solutions for medium and heavy-duty electric vehicles.

Irwin thinks WAVE will hit revenue of $5 million this year, growing to about $85 million by 2025 on the delivery of 250 of its charging units that year.

“We see WAVE gaining increasing traction based on the support for higher fleet utilization, the safety profile of the product, and simplicity of operation, while customers say charging costs and energy efficiency are similar to the alternative pantograph and plug-in solutions,” Irwin said.

On Medici Motor Works, the company is currently developing a line of three all-electric trucks and three all-electric buses in partnership with China-based manufacturers, with first vehicles expected to be on sale in North America later this year.

IDEX also has a 22-per-cent equity stake in Northern California-based electric tractor company Solectrac; a 20-per-cent stake in Italian electric motorcycle manufacturer Energica, which has three consumer-focused road motorcycles and proprietary EV battery and DC fast-charging systems; and a $15-million investment through a six-per-cent promissory note in Italian engineering and design services company Silk EV, through which IDEX hopes to gain insights into tech advances in the EV market related to batteries, power management systems and high-performance motors.

Ideanomics Capital includes real estate transactions company Timios, a 98.4-per-cent stake in the Delaware Board of Trade, a ten-per-cent ownership of blockchain tech company Liquefy, a 15-per-cent stake in Technology Metals Market and a 60-per-cent joint venture equity ownership in financial services company Intelligenta.

By the numbers, Irwin is calling for revenue of $105 million and $145 million in 2021 and 2022, respectively, rising to $500 million by 2025, with EPS going from negative $0.11 per share and negative $0.05 per share in 2021 and 2022, respectively, and reaching $0.25 per share in 2025. Adjusted EBITDA is expected to be positive by 2023. (All figures in US dollars.)

“Our 12-month target uses a 30x multiple on 2025E EBITDA of $123 million, discounting back at 12.5 per cent for three years,” Irwin said.

Ideanomics reported its full year 2020 financials on March 31, showing
2020 revenue of $26.8 million compared to $44.6 million in 2019 with a net loss of $106.0 million compared to a loss of $96.8 million a year earlier. The company’s EV-related revenue rose from $2.7 million in 2019 to $19.5 million in 2020, while IDEX finished the year with a cash position of $166 million.

The company noted that 2019’s revenue included a $40.7-million contribution from a Digital Asset Management Services contract which is not expected to generate revenues going forward. IDEX said it expects revenues from charging systems to grow with the acquisition of WAVE.

“We are very pleased with the transformation that took place this past year,” said CEO Alf Poor in a press release. “Despite a year highlighted by COVID-19, we were able to build the groundwork for 2021 and beyond for Ideanomics and we are excited for what the future holds with our recent activity across the EV ecosystem and developments in EV charging infrastructure.”