Flying Cars 2023: Should You Invest in This Hyped Up eVTOL Stock?

Stock Market

EHang Holdings Ltd (NASDAQ:EH) represents a new kind of EV stock.

It leads the Urban Air Mobility sector in China with its autonomous aerial vehicle technology aimed at disrupting transport and logistics, creating smart cities. Yet, many investors believe this EV stock is overvalued at nearly $18 per share.

EHang is a pioneer in the Chinese electric vertical takeoff and landing sector. The first public company in this space, EHang has clearly made waves globally.

While it shows promise with 23% year-over-year revenue growth, profitability remains a challenge, with a $10.4 million loss in Q2 2023. Yet, EHang’s EH216 air taxi, priced at over $300,000, is a remarkable achievement.

However despite these numbers, it is no secret that Ehang is still in the early stages of development, and has yet to reach its full potential.

With the continuing trend of electric vehicles and interest in air taxis, this EV stock is a promising option for investors looking to take advantage of the urban mobility space. 

Let’s delve into the facts first in this article.

A Different EV Stock

Investing in EHang comes with risks. This EV stock has been highly volatile, with significant price fluctuations in recent times. However, in July, the company received a substantial private placement of $23 million from strategic investors.

EHang established a strategic partnership with the Bao’an District Government in China’s Shenzhen municipality to support the assembly and delivery of EH216-S autonomous aerial vehicles. The exact cost wasn’t disclosed, but his partnership marks a pivotal moment for EHang.

EHang is deeply rooted in an extensive testing network, covering 19 sites in 17 Chinese cities, with over 8,000 trial flights. It’s ready for the eVTOL future.

EH Fundamentals

EHang Holdings stands out as a prime Chinese eVTOL investment option, notably because of its existing revenue generation. 

While EHang saw its revenues drop to $1.4 million in Q2, the company remains unprofitable, posting a $10.4 million loss. To support its operations, EHang secured a $23 million private placement investment, extending its runway until July 2024.

The company’s fate hangs in the balance as it races against time for further certification.

EHang boasts an order backlog of over 100 units for its EH216-S vehicle and operates 20 trial sites in 18 Chinese cities for tourism. Despite risks, the stock’s price above $19 suggests stability for investors.

What Now

It’s possible to be both excited about EHang’s growth prospects, but not its price. This is a startup company in a risky sector, amplifying the potential returns (and downside) of an investment.

Thus, I’m of the view that for those bullish on the eVOTL space, spreading out investments across multiple companies in different markets may be a better idea. Additionally, I think it’s probably best to avoid over investing in this company, or this sector.

The flying car market, particularly EHang, holds long-term potential. Prepare for EH stock to hit zero or potentially become a hero.

To sum up, EHang Holdings seems overpriced, given its weak financials and uncertain profitability and growth prospects. That said, perhaps it’s a speculative buy for certain investors who can stomach the risk.

It really depends on the assumptions one plugs into their financial models. Personally, the numbers don’t work for me right now, and I don’t like the geopolitical risk with this stock. Thus, it’s a stock I’m going to remain on the sidelines with right now.

On the date of publication, Chris MacDonald 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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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