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Why EHang Holdings Is Losing Altitude Today

By Lou Whiteman – Dec 2, 2021 at 10:56AM

Key Points

  • EHang is a Chinese developer of autonomous flying taxis that has gotten a lot of investor attention this year.
  • Despite its promise, this is a highly valued stock that is unlikely to generate substantial revenue for some time.

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Earnings provided few details of when the air taxis will be flying.

What happened

Chinese autonomous flying taxi start-up EHang Holdings (EH -1.84%) reported quarterly results overnight, and investors were underwhelmed by what they saw. Shares of EHang traded down more than 12% on Thursday morning after the company reported anemic revenue in the most recent quarter.

So what

EHang is in the process of developing an electric flying air taxi capable of vertical takeoff and landing. There's a huge potential market for a vehicle more efficient and faster than an automobile but not as expensive as a long-distance jet. But there are also many companies pursuing that market.

Artist illustration of a flying taxi.

Image source: Getty Images.

Overnight, EHang said it lost RMB73.3 million ($11.4 million) in the third quarter on revenue of RMB13 million ($2 million). Revenue was up a modest 6.6% from the second quarter, and the loss was similar to the second quarter's RMB74.9 million sum.

Investors knew going in that this early-stage company was not going to generate a lot of revenue, but they were eager for an update on EHang's progress in bringing its vehicle to market. The company said that certification work continues with the Civil Aviation Administration of China, noting that it had achieved more than 20,000 autonomous trial flights as of the end of November.

The company also announced partnerships to develop an unmanned autonomous vehicle franchise in both Shenzhen, China, and the Iberian Peninsula and Latin America. But there is still very little indication of when such a service might be up and running.

Now what

EHang has been a euphoria stock in 2021. The shares at one point early in the year were up more than 450%, but they are now down 16% since January 1. Even after the decline, the company still trades at a rich 35 times sales, meaning a lot of future growth is still priced in.

There is solid reason for optimism over the prospect that these electric air taxis will eventually take flight and be part of a greener transportation system, but it is far from clear that EHang will be among the eventual winners. Even after Thursday's decline, this stock has no value, and investors interested in buying in should be aware that it is likely to continue along its turbulent path for some time to come as the market and the business more fully develop.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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