Although one of the most popular trading opportunities over the past year thanks to rampant market speculation and social media chatter, Ideal (NASDAQ:IDEX) has a sentiment-based Achilles heel: the five-year chart of IDEX stock.
Jumping from one extreme to the other, Ideanomics is not what a financial advisor would call a heartwarming investment. It’s basically the equivalent of betting on racehorses without having any understanding of horse racing or even the lexicon. If you don’t mind living dangerously, I guess IDEX stocks can offer potential for profit on either side of the trade.
However, analysts have noted a key business segment under the complex and ever-changing corporate umbrella of Ideanomics. The direction is bullish on Soletrac, a manufacturer of electric tractors. In October 2020, Ideanomics was the lead investor in a capital increase of $ 1.3 million.
The implication for the IDEX action is obvious. As society and politics demand cleaner energy solutions, electric vehicles and machinery appear poised to replace their combustion counterparts. It could put Soletrac in the driver’s seat.
Before diving in, however, it’s best to consider the pros and cons of the viability of Ideanomics’ e-tractors.
Is clean energy finally the right business for IDEX Stock?
As our own Chris MacDonald explained last month, Ideanomics has been involved in several disparate ventures, ranging from cryptocurrencies and artificial intelligence to electric tractors and other electric vehicles. You might call it adventurous, but investors have historically been frightened by the lack of direction.
But with Soletrac, relevance and the ability to start making an impact bodes well for the IDEX stock. Below are three catalysts to note.
- Zero emissions: On the internet you will find debates on just about any topic and climate change is no exception. What I can say is that the major scientific institutions have sounded the alarm bells for years. With Soletrac e-tractors, products are part of the solution with their zero emissions. And this is also a big positive point for the human operator.
- More reliability: In a question-and-answer session with CleanTechnica, Soletrac Founder and CEO Stephen Heckeroth said his company’s electric tractors have “a moving part and will last 100 years. A diesel engine has over 300 moving parts that require constant maintenance. Electric charging costs are 1/2 to 1/8 the cost of diesel fuel. Over time, it pays to buy Soletrac products compared to combustion engine tractors.
- Solar compatible: Although this may seem obvious, it should be clarified that these e-tractors are compatible with energy derived from solar panels. In the future, therefore, it is conceivable that we may have a completely clean energy infrastructure that could revolutionize the otherwise stagnant agricultural industry. Also, it could inspire future generations to consider technology-based farming solutions, boosting a sector that could use love.
But don’t go wild on Ideanomics just yet
While the high-level concept behind IDEX stock is undoubtedly exciting, reality can bite you like a mad dog. Here are some important headwinds to consider in your research.
- Energy density: While the future of mobility is likely electric, the big question is when. Certainly, engineers have made huge strides in EV technologies. However, the laws of physics will not be denied. Simply, current clean solutions cannot overcome the energy density of fossil fuels. And when these tractors take three to six hours to recharge, according to the CEO of Soletrac, operational capacity becomes an issue.
- Higher initial costs: Just like in the consumer electric vehicle market, electric tractors cost significantly more than their combustion counterparts. According to a report from the industry journal Agri-Vue, electric motors and batteries cost about twice as much as diesel engines. A quick glance at the prices confirms this. Please note that Heckeroth said Soletrac’s electric tractors cost $ 40,000.
- Drought: As you’ve probably heard, the Southwestern region of the United States faces a serious water crisis. Various media report that reservoirs serving the water needs of several states have eroded to alarming levels. If the water crisis has no direct impact on the stock of IDEX, it harms agricultural activity. Obviously, there is no point in cultivating if you don’t have enough water. In this stressed environment, I would say the chances of farmers buying electric tractors are slim to none.
Realities exceed aspirations
When it comes to investment analysis on popular stocks, you are severely criticized if you have the “bad” opinion. But what social media doesn’t respect at all is taking a neutral stance. I guess by pulling a Swiss you’re denying the perma-bulls emotional release: either euphoric binge eating or cathartic outbursts of sheer rage.
Well, rage away. I am skeptical of the IDEX stock because if the Soletrac angle is promising, that is exactly what it is, promising. The catalysts that support Soletrac are ambitious: electric vehicles being the future, the integration of clean energy, cost savings over time and economies of scale.
On the other hand, negatives are realities in the here and now. Anger will not make diesel less energy dense. Anger won’t make electric tractors any cheaper, either. Certainly, anger is not going to raise our water levels. Combined with the poor quality history of IDEX stocks, I think most investors will eventually walk away.
As of the date of publication, Josh Enomoto did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
Former senior business analyst for Sony Electronics, Josh Enomoto has helped negotiate major contracts with Fortune Global 500 companies. Over the past few years, he has provided unique and essential information for the investment markets, as well as for various other sectors, including law, construction management and health.