Please ensure Javascript is enabled for purposes of website accessibility

EHang Holdings Stock Had a Turbulent Day: Here's What It Means

By Lou Whiteman - Mar 10, 2021 at 3:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock took investors on a wild ride on Wednesday. More turbulence is likely.

What happened

Shares of flying taxi manufacturer EHang Holdings (EH 0.12%) were on the move on Wednesday, up as much as 18% and down as much as 9% at various times during the day. The stock was down about 5% heading into the final trading hour of the day.

So what

EHang investors have been on a wild ride in 2021. The stock was up as much as 450% for the year in early February before falling back some following a critical report from Wolfpack Research calling the company "an elaborate stock promotion."

EH Chart

EH data by YCharts

The company is developing an electric flying air taxi capable of vertical takeoffs and landings, as well as a number of drones and autonomous software. EHang quickly fired back with a defense against Wolfpack's charges, and the stock is still a double for the year, but the report if nothing else worked to slow the seemingly unstoppable rise of earlier in the year.

In recent weeks EHang has traded in tandem with other high-growth early-stage companies, rising on days when those companies were doing well and falling on days when markets were more skeptical. That was true on Wednesday as well, with the shares taking off early in the trading session along with a lot of other high-interest stocks like Tesla and Virgin Galactic Holdings but losing steam as the day went on.

Illustration of a air taxi in flight.

Image source: Getty Images.

Now what

There is a lot of volatility in EHang shares right now, and no reason to believe that will change any time soon. Even assuming there is nothing to the Wolfpack report, it is hard to make the case for the company based on fundamentals: EHang right now has very little revenue, but is valued by the market at more than $2 billion.

The market is valuing the company on its potential, not on its current business. There is nothing wrong with that, but investors need to remember that a lot can go wrong along the way. At best I'd advise limiting this stock to a small part of a diversified portfolio, with the understanding that although it could go up from here, there is also a lot of room for it to fall.

For most, this is a story best watched from the sidelines for now.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

EHang Holdings Limited Stock Quote
EHang Holdings Limited
$8.10 (0.12%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.