Don't Look Now, But Kandi Is Revving Up Again

The Chinese maker of electric vehicles has seen its stock soar 26% over the past week, but it still has plenty to prove.

Rick Munarriz
Rick Munarriz
Oct 7, 2015 at 12:47PM

Image source: Kandi.

One of China's more beaten down stocks is shifting out of reverse. Kandi Technologies (NASDAQ:KNDI) has seen its shares move higher for five consecutive trading days.

We're not talking about tiny moves, either. Shares of the maker of value-priced electric vehicles have climbed 3%, 3%, 6%, 8%, and 4% in the past five trading days respectively. The stock may have hit yet another all-time low of $5.05 the day before the rally began last week, but Kandi investors have enjoyed a 26% pop through the past five days.

The stock opened nicely higher again on Wednesday, but it remains to be seen if it can stretch its streak to six days of notable gains.

Any celebration should be tempered by the stock's grim price chart. Kandi stock has surrendered slightly more than half of its value this year despite the big pop over the past week. It has actually shed more than two-thirds of its value since peaking at $22.49 last summer.

It's been a wild ride. Shares of Kandi more than tripled last year as investors got excited about the potential for China's nascent market for electric vehicles. It's not a secret that China's more populous regions have a serious air pollution problem, and the government has tried to encourage the switch to electric cars as a way to fight the smog. China's offering chunky subsidies to buyers of homegrown green energy vehicles, and that's something that should benefit Kandi as it toils away in the entry-level end of the market.

However, most of Kandi's sales so far haven't been to retail customers. Its biggest source of sales through its car-building joint venture with Geely Automotive has been to work with municipalities to set up affordable garages where Kandi's compact vehicles can be rented by the hour. The target market for Kandi has been people that don't own cars but can use one to go shopping or for social purposes. 

Big orders for the car-sharing program come in spurts, making Kandi's financials lumpy from quarter to quarter. It also doesn't help that there isn't a single major analyst offering up sales and profit forecasts on Kandi, resulting in heavy volatility around earnings season.

Kandi has also been a popular target for naysayers. The SEC did wind down an investigation into the electric-car maker earlier this year, but that hasn't silenced larger concerns about its past and accounting practices. This explains why Kandi seems to be in the right place at the right but it has been the wrong investment since peaking 15 months ago. 

Rattling off five consecutive profitable quarters -- according to S&P Capital IQ data -- hasn't eased the speculative nature of the stock. It's been rolling these days with a lack of material news, but one way or another Kandi is going to have to eventually prove the naysayers wrong. It still has a long way to go to get there. 

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