Kaixin Auto Holdings: Buy, Sell or Hold

Based in Beijing, China, Kaixin Auto Holdings (KXIN) operates as a leading new auto retail platform for luxury used cars and imported new cars. The company also engages in the R&D, design, manufacturing, and sales of electric vehicles and offers third-party financing and value-added services, including extended warranties and insurance. KXIN’s shares have declined 64.9% in price over the past year and 52.2% over the past six months to close yesterday’s trading session at $1.19.

However, the stock has been gaining traction amid positive developments from the company. Last month, KXIN announced a partnership with Beijing Camping Club Sports and Culture Communication Co., under which Camping Club agreed to order at least 20,000 new-energy vehicles from KXIN over the next five years, totaling approximately 6 billion RMB (approx. $938 million). In addition, KXIN signed a sales order for 5,000 new-energy logistics vehicles with Beijing Bujia Technology Co., Ltd., totaling 1 billion RMB, (approx. $156 million), in 2022 and 2023. The shares of the auto retailer have gained 17.8% in price over the past month.

“The new-energy vehicle business of Kaixin will focus on securing large orders from our strategic partners, accelerating growth of overall business scale through integration of different scenarios, transboundary cooperation, and cross-industry joint innovations,” said Mingjun Lin, chairman, and CEO of Kaixin.

Click here to checkout our Electric Vehicle Industry Report for 2022

Here is what could shape KXIN’s performance in the near term:

Weak Bottom Line

For the six months ended June 30, 2021, KXIN’s total revenues came in at $2.04 million, representing a 205.7% increase from the first half of 2020. However, its loss from operations came in at $144 million, compared with  $12,000 in the first half of 2020. The increase resulted mainly from a $143.70 million loss from full impairment of the goodwill established at its reverse acquisition, plus a $0.3 million increase in general and administrative expenses. KXIN completed a reverse acquisition with Haitaoche Limited on June 25, 2021. Its net loss attributable to the company was $144.20 million, compared to the $0.05 million  year-ago value of in the first half of 2020. And the company’s adjusted loss from operations increased 3,200% year-over-year to $0.33 million, while its adjusted net loss grew 940% year-over-year to $0.52 million.

POWR Ratings Reflect Uncertainty

KXIN has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a C grade for Growth, which is consistent with its mixed growth in its last reported financials.

KXIN also has a C grade for Momentum. This is justified because the stock is currently trading above its 50-day moving average but below its 200-day moving average.

Among the 25 stocks in the Auto Dealers & Rentals industry, KXIN is ranked #21.

Beyond what I have stated above, you can also view KXIN’s grades for Quality, Value, Sentiment, and Stability here.

View the top-rated stocks in the Auto Dealers & Rentals industry here.

Bottom Line

KXIN’s pivot to selling electric cars is helping the stock to soar as investors explore the growth potential in China’s fast-booming EV sector. However, the global semiconductor chip shortage could be a significant headwind for KXIN. According to the China Passenger Car Association (CPCA), global foundries can produce enough semiconductor chips and microcontrollers to supply 4 million electric cars in China, which leaves a shortfall of 1 million vehicles because demand is expected to jump to 5 million units in 2022. “The shortage of automotive chips that had hindered the growth of the car market has yet to ease,” the CPCA said. So, we think it could be wise to wait to see how KXIN reinforces its EV production and get its orders executed, and its bottom line improves before investing in the stock.

How Does Kaixin Auto Holdings (KXIN) Stack Up Against its Peers?

While KXIN has an overall POWR Rating of C, you might want to consider taking a look at its industry peers, Penske Automotive Group, Inc. (PAG) and AutoNation, Inc. (AN), which have an A (Strong Buy) rating.

Click here to checkout our Electric Vehicle Industry Report for 2022

KXIN shares were unchanged in premarket trading Tuesday. Year-to-date, KXIN has gained 4.39%, versus a -3.52% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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