Ola Electric stock price strategy: Analysts and investors alike are perplexed by the stock's meteoric ascent. Nevertheless, they advise shareholders to hang onto the stock because it is still just a "momentum" bet. The stock, which went public on August 9, gained 92% (up to August 19) above its issue price of Rs 76, increasing its market capitalization to little over Rs 64,400 crore. Subscribers saw the issue 4.45 times.
It is astonishing that the stock has moved swiftly and gained strong momentum in spite of the IPO's pessimism and a sluggish listing. Since the fundamentals haven't changed in the past two weeks, it's difficult to understand the reasoning behind such a dramatic rise. However, traders or investors can use this approach to pursue the momentum as long as they maintain stringent stop-losses, according to independent market expert Ambareesh Baliga.
The share price of Ola Electric reached an all-time high of Rs 146.03 per share on the BSE on Monday, August 19, after hitting the 10% upper circuit. The BSE benchmark, the Sensex, finished 12 points (0.02%) lower in contrast. Ola Electric's circuit restriction was lowered last Friday, August 16, from twenty percent to ten percent, following an incredible five-session surge.
What's driving the uprising?
According to Deven Choksey, Managing Director of DRChoksey FinServ, a significant portion of the purchase of Ola Electric stock in recent sessions may be attributed to institutions adding exposure to fresh stocks on the market and the substantial liquidity flows in the markets.
"We believe that the stock's present values are a little stretched, since they appear to be accounting for the majority of the events. Investors who purchased shares at the IPO price may later enter at a cheaper price and book a partial profit, he noted.
The Red Herring Prospectus (RHP) for Ola Electric states that 82.74 percent of the outstanding shares are locked in, with the remaining 17 percent of the stock being free float. Analysts, however, feel that the company's high valuation and loss-making status continue to cast doubt on the stock's fundamentals. As a result, even if a correction today seems improbable given the positive feeling in the market, a reversal in the overall direction of the market might lead to more aggressive stock selling.
In the event that the markets correct, the stock can still find support and manage to rise, perhaps by up to 5%. However, since confidence (in fundamentals) is the key to liquidity, one must observe how these momentum seekers respond in the event of a severe market drop." Baliga issues a warning.
In terms of finances, Ola Electric Mobility recorded a net loss of Rs 347 crore for the April–July quarter of Q1FY25, as opposed to a net loss of Rs 267 crore for the same period in Q1FY24. However, year-over-year (Y-o-Y) revenue from operations climbed by 32.3% to Rs 1,644 crore, with the automotive segment's Ebitda margin rising by 632 basis points to -1.97 percent.
Significantly, the business sought an EV/Sales multiple of 6.3x at the issue price of Rs 76, according to brokerages' pre-IPO notes. This was a substantial premium over the peer average of 3.1x. The global stockbroker HSBC notes that Ola Electric's development trajectory is unlikely to be linear in the near future, since the business anticipates a much slower pace of electric vehicle (EV) uptake.
"The company said it expected electric two-wheeler (e2W) penetration to reach 41-56 per cent in the financial year 2027-28 (FY28), while we expect it to be just 20 per cent by FY28 and 30 per cent by FY30," the brokerage stated in a recent report.
A venture into battery manufacture may be problematic as a failure to compete with global companies on quality and yield may effect regulatory assistance; aside from that, HSBC stated Ola Electric may not gain market share since incumbents are now equally active; regulatory support via subsidies may ultimately wane; and entering the battery business might be dangerous since it could lose market share and strength on its financial sheet if it can't match the quality and yield of major global competitors.
The brokerage's target price of Rs 140 for the stock has already been exceeded. In Q1FY25, Ola Electric delivered 1,25,198 vehicles, the most ever, compared to 70,575 over the same time previous year.
"Even though it's widely accepted that the e2W market will develop significantly and Ola has promised to take management of the battery component internally, most benefits appear to be aggressively priced in. However, if more institutions buy up shares to increase their exposure to the sunrise industry, there may still be some movement in the stock," according to Nirav Karkera, head of research at Fisdom.
