Kandi Technologies Electrifies Scooter Market

Kandi Technologies A Niche Player In The EV Market 

Kandi Technologies NASDAQ: KNDI is an interesting play on the EV market for a number of reasons. The company manufactures and distributes a variety of parts and specialty vehicles for the EV market, notably self-balancing scooters. The company recently, within the last year or so, shifted its focus away from the larger, lower-margin vehicles in favor of smaller EV products and that shift is taking hold. The problem is that revenues are down noticeably and missed the consensus estimates because of it. While growth in the scooter market is strong and appears to be gaining traction, it looks like the shift may have been a little extreme. With the EV market booming like it is, Kandi Technologies should be growing its revenue not shrinking it. 

Mixed Results For Kandi Technologies 

Kandi Technologies had a tough quarter despite robust triple-digit gains in the scooter market. The company reported $16.8 million in revenue which is down -10.3% from last year and missed the Marketbeat.com consensus by 5700 basis points. Some of the miss can be attributed to supply chain hurdles and related disruptions but not all. On a segment basis, the scooter segment grew an astounding 600% while the previously “core” segments of EV parts and Offroad both posted declines. The EV Parts segment revenue came in at only $3.2 million or down 62% from last year while the Offroad segment shrank a smaller 23%.

Moving down to the earnings, the news is little better. The company posted a 450 basis point contraction in gross margin that left earnings down from last year, short of consensus, and in the red. The GAAP -$0.10 missed the consensus by $.29 and reverses a profit in the previous year. 

“Sales are surging in the segment of e-Scooters, electric self-balancing scooters and associated parts sales. With explosive growth again this quarter, we are increasingly confident that our traction in this market can continue. Our strategic entry into this market last year represents a great success in identifying and developing intelligent transportation products to counteract the impact to EV market demand caused by the COVID-19 outbreak ... We expect the EV-related business recovery to take time. Our restructuring of this business segment resulted in lower sales of EV products and parts,” Hu Xiaoming, Chairman and CEO of Kandi commented.

Kandi Technologies did not give any guidance for the next quarter but is optimistic about the future. The company received the final payment on the sale of an equity position in Fengsheng and is now in the best financial position of its existence. The company has more than $211 million in cash and equivalents with an additional $289 in working capital and inventory so is more than prepared to complete its transition and invest in growth opportunities. 

The Technical Outlook: Kandi Technologies Sets New Low

Shares of Kandi Technologies rocketed higher the day before the earnings release and then fell back to earth just as quickly. The post-release decline put price actin at a new low as well, indicating weakness in the market that may result in additional lows over the next few months. The price action rebounded a little the day after the plunge but resistance is strong at the short-term moving average. Assuming price action makes a definitive break to new lows, we see this stock shedding as much as $2.00 or 50%. If not, the best we would expect to see is range-bound trading until better news comes out. The key level for support is at $4.00, if that is broken a move to $2.00 is highly likely.