Geely Automobile Holdings: Is This Electric Vehicle Stock Still a Buy?

Headquartered in Wan Chai, Hong Kong, Geely Automobile Holdings Limited (GELYY) is an investment holding company engaged principally in automobiles. The company is engaged in the research and development, production, marketing, and sale of automobiles, automobile parts, and related automobile components, as well as the provision of related after-sales and technical services. Its major products include Emgrand electric vehicles (EVs), Vision sports utility vehicles (SUVs), Geely Panda, and Free Cruiser, among others. GELYY operates its business mainly in China, Europe, Middle East, Africa, Center and South America.

China is a major EV market and  EV sales there might reach 1.8 million units in 2021, up 40% from a year earlier, according to Xu Haidong, the deputy chief engineer of China Association of Automobile Manufacturers (CAAM). Driven by China’s rapid economic recovery, and a growth in demand for EVs, GELYY reported a strong recovery in its sales in December.

The stock has gained 96.9% over the past three months to close Friday’s trading session at $79.52. This impressive performance and potential upside based on several factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates GELYY:

Trade Grade: A

GELYY is currently trading above its 50-day and 200-day moving averages of $63.81 and $48.70, respectively, indicating an uptrend. Moreover, GELYY has gained 42.3% over the past month, reflecting  solid short-term bullishness.

For the period ended June 30, 2020, the company’s revenue decreased as a result of lower sales volume and  production disruptions caused by a partial lockdown in most areas in China in early 2020. However, the group’s sales performance has started to recover strongly. The group's sales volume has increased roughly 19% year-over-year to 154,202 units for the month of December 2020. Its  sales volume in the China market was 142,297 units, which increased roughly 12% year-over-year.

On January 11, Baidu, Inc. (BIDU) announced that it will be partnering with GELYY  to make smart EVs. While BIDU is expected to provide EV’s the intelligent driving capabilities, GELYY is expected to contribute  its design and manufacturing expertise. In October,  it was announced that Polestar, the EV unit of the company, is in advanced talks with investors to raise $800 million to $900 million in its first external fundraising.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , GELYY is well positioned. The stock is currently trading 7.3% below its 52-week high of $85.78, which it hit on January 8.

The company’s net revenue grew at a CAGR of 4.9% over the past three years driven by the company’s strategic partnerships and continuous innovations.

Peer Grade: A

GELYY is currently ranked #8  of 51 stocks in the Auto & Vehicle Manufacturers industry. Other popular stocks in the auto & vehicle manufacturers group are Ford Motor Company (F), Ferrari N.V. (RACE), and Fiat Chrysler Automobiles N.V. (FCAU).

GELYY has comfortably beaten the returns of these popular industry participants gaining 107.6% over the past year. F, RACE, and FCAU have gained 7%, 21.7% and 10.3%, respectively, over the same period.

Industry Rank: A

The Auto & Vehicle Manufacturers industry is ranked #3 of  123 StockNews.com industries. The companies in this industry are engaged in the manufacturing and selling of vehicles such as scooters, passenger cars, and light trucks, among others.

While many  vehicle manufacturing units remained closed amid the pandemic, most of them have reopened, taking necessary precautionary measures. Many e companies have been entering the EV space and the  industry’s growth has been accelerating.

Overall POWR Rating: A (Strong Buy)

GELYY is rated “Strong Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

GELYY has the potential to soar in the upcoming months despite gaining 107.6% over the past year, based on its continued business growth and growing demand for its products. The consensus revenue estimate of $16.68 billion for the fiscal period ending December 31, 2021 represents  a 17.5% increase year-over-year.

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GELYY shares were trading at $84.50 per share on Tuesday afternoon, up $4.98 (+6.27%). Year-to-date, GELYY has gained 24.43%, versus a 1.35% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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