Increasingly, I’m getting the impression that we’re headed toward a significant correction in the market. It’s hard to remember a time when seemingly any and all speculative plays have risen, whether for logical reasons or not. Among them, Ideanomics (NASDAQ:IDEX) has drawn massive interest, in large part because of its phenomenal performance. On a year-to-date basis, IDEX stock is up 124%.
Not only that, over the trailing year, Ideanomics gained nearly 883% of market value.
Obviously, this means that before the pandemic, IDEX stock was on the sub-dollar menu, not necessarily a great place to be if you’re trying to inspire confidence. But as society gradually recovers from the novel coronavirus, Ideanomics finds itself looking quite chipper.
To be fair, some fundamental reasoning exists for the bullishness in IDEX stock. Mainly, the underlying company features two incredibly relevant businesses: electric vehicles and fintech. Apparently, the thinking is why stick with one burgeoning market when you can have two?
Again, to give a fair shake to IDEX stock, I can see on paper why shares might appeal to some speculators. For one thing, you have companies like Tesla (NASDAQ:TSLA) that seemingly have no ceiling. Further, the political environment both in the U.S. and internationally favor a transition to clean energy.
Plus, EVs are far more dummy-proof than combustion cars. You don’t have to deal with frequent maintenance items like oil changes, which was a huge benefit during the Covid-19 lockdowns.
On the fintech front, high-powered brands such as Square (NYSE:SQ) and PayPal (NASDAQ:PYPL) have delivered critical business services, allowing smaller companies to compete with larger organizations. Tintech innovations are responsible for underpinning the burgeoning gig economy as well.
Therefore, it seems that no matter which way Ideanomics turns, IDEX stock can’t lose. However, this is probably the worst position to be in for either of these sectors.
IDEX Stock May Be a Losing Proposition
No one knows which way IDEX stock will go in the near term, especially with the present market environment. However, when it comes to the longer-term narrative, my InvestorPlace colleagues have hit the nail on the head.
Chris Markoch stated that while Ideanomics seems to have two relevant businesses, “it remains to be seen if it has a core competency in either one.” Thomas Niel wrote that IDEX is a “jack of all trends, disruptor of none.”
In my opinion, the main challenge for Ideanomics is that these two sectors, though relevant, present debilitating pitfalls if you don’t have the necessary commitment level. For instance, fintech is a volume game. You’re not going to win over the addressable market by simply serving a niche segment of it.
As Niel pointed out, Ideanomics “doesn’t hold a candle to names like Square.” Further, I would add that blockchain projects already integrate artificial intelligence and smart contracts to minimize friction in payment processing and business transactions. Thus, I’m not entirely sure what Ideanomics would bring to the table that hasn’t already been brought.
Regarding EVs, this sector also requires maximum focus and core competency. Not only that, one has to define a strategy to best compete against market leader Tesla. As an example, Lucid Motors is attacking Tesla through the ultra-luxury strategy, producing EVs featuring premium materials and craftsmanship, the latter an attribute Tesla has periodically lacked.
I’m assuming that automakers like Toyota (NYSE:TM), when they enter the EV market full force, will address the lower end of the price spectrum. Either way, it’s a huge risk.
For example, evidence indicates that Tesla really isn’t profitable without selling carbon credits. On the other end, current EV technology isn’t robust enough to attack economically priced variants without the help of government subsidies.
In other words, if Ideanomics wants to make a dent in the EV space, it’s going to need to make expensive outlays before the business becomes viable.
Appears Like a Gimmick
So far, I’ve been wrong in my pensiveness with IDEX stock. The reality right now is, if enough people see opportunity in it, it honestly doesn’t matter what the fundamentals imply. But this dynamic is also why I’m still hesitant about IDEX for the long haul.
Ultimately, our own Matt McCall may have given the best take on Ideanomics. Historically, the company has been all over the map regarding what it wants to do. This constant pivoting lacks focus, commitment and dedication to really make a difference in any of its chosen markets.
Still, you can do what you want with your money. However, if you want to know where my money will be going, it’s definitely not in IDEX stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.