What could happen if you hang out with EHang (NASDAQ:EH) stock for a few years? There are no guarantees, but you might just have a huge winner on your hands as EHang is on the leading edge of an underappreciated hyper-growth industry.
Based in China, EHang is an autonomous aerial vehicle technology platform company — or in other words, a flying car maker. It’s an exciting business segment to be part of now, as Morgan Stanley analysts estimate that the flying car market will exceed $1.5 trillion by 2040 and China will command 29% of this market.
Furthermore, EHang anticipates that the urban air mobility industry will expand to a total addressable market (TAM) of $9 trillion by 2050. Want to get a piece of the action? Better put your helmet on, then, for a wild ride with flying vehicle startup EHang.
EH Stock Soars, Crashes and Rises Again
I must start with a disclaimer: there are risks involved if you plan to invest in EHang. EH stock is volatile, having risen from $24 to $124 in 2021, before crashing to $9 earlier this year but then rallying to $20 recently.
In other words, be prepared for big share-price moves in both directions. Still, there’s no denying that July was a great month for EHang. First, Ehang received a private placement (i.e., a gigantic share purchase not available to the public) from “several strategic investors” including K-Pop music mogul Lee Soo Man. This private placement is reportedly valued at $23 million.
So, that’s a nice capital infusion for EHang. Moreover, EHang signed a Memorandum of Understanding (MOU) with the Bao’an District Government of China’s Shenzhen municipality. This is a strategic partnership in which the Bao’an District Government will provide support as EHang assembles and delivers EH216-S autonomous aerial vehicles.
The press release didn’t specify a total price for these aerial vehicles. Nevertheless, this strategic partnership is undoubtedly a watershed event for EHang and its stakeholders.
EHang’s Financials: Imperfect, But Improving
So far, it certainly sounds like EHang is running on all cylinders. Is the company financially sound, though? That’s a valid question, and the answer is: it’s complicated.
If you’re looking for a profitable business to invest in, you might not be interested in EH stock. During this year’s first quarter, EHang incurred a non-GAAP adjusted net loss of 33.6 million RMB ($4.9 million).
However, this result represents an improvement of 43.5% compared to the net loss of 59.4 million RMB from 2022’s fourth quarter. In other words, it might be just a matter of time before EHang achieves profitability.
Additionally, EHang reported 22.2 million RMB ($3.2 million) in total revenue during Q1 2023. That’s a 41.6% improvement over the 15.7 million RMB that EHang generated in Q4 2022. Clearly, the company is growing its sales and if the flying vehicle market gains traction, EHang could become a darling on Wall Street in the coming quarters.
Try a Tiny Share Position in EH Stock
I’m enthused about EHang, but it’s a start-up business in a somewhat risky market segment. Therefore, it’s not advisable to over-invest.
Instead, consider a very small share position in EHang. The flying car market, and specifically a stake in EHang, has long-term rainmaker potential. So, be prepared for EH stock to eventually go to zero or, possibly, make you a hero.
On the date of publication, David Moadel 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.
