What’s Driving Ola Electric Share Price Up?
Ola Electric’s stock has been on the rise, with an increase of over 12%. This surge came after Citi gave it a “buy” rating and set a price target of ₹90, representing a potential upside of 22%. But why has Citi shown confidence in this company?
Firstly, Ola Electric holds a substantial 38% market share in the rapidly growing electric vehicle (EV) sector. This strong position is boosted by a diverse product portfolio that includes not just electric scooters but also upcoming motorcycles and electric three-wheelers, which could drive future sales.
Citi also points out the company’s focus on research and development (R&D), which is crucial in the fast-evolving tech space of electric mobility. Another key factor is Ola Electric’s vertical integration and large-scale production capacity. All these elements put together make the company a significant player in the market, and Citi believes these strengths will help maintain its growth trajectory.
Challenges Faced by Ola Electric
While the outlook seems positive, there are several hurdles Ola Electric must overcome. One of the main concerns is its service perception, which has not been very favorable recently. However, Citi expects this to improve in the medium term as the company enhances its supply chain to keep up with the rising demand for its products.
Another issue is that Ola Electric has not yet reached breakeven at the EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) level. This means the company is still in the process of scaling its operations efficiently. Until it achieves profitability, investors will need to be patient and understand that growth might be slow in the short term.
The Role of the Gen 3 Platform
Ola Electric believes its upcoming Gen 3 platform will be a game-changer. The company is hopeful that this new platform will significantly improve its profitability, but only time will tell if these claims hold true. If the Gen 3 platform lives up to expectations, it could provide a solid foundation for the company’s future, boosting its Ola Electric share price even further.
Competition and Risks in the EV Market
As the electric two-wheeler market grows, competition is heating up. Key players like Eicher Motors, Hero MotoCorp, Bajaj Auto, and TVS Motor are all vying for a share of this expanding market. For investors, the risk of elevated competition is one of the key concerns. If any of these competitors manage to outpace Ola Electric in terms of product innovation or market share, it could impact the Ola Electric share price.
Another major risk is the overall penetration of electric vehicles in the two-wheeler market. While EV adoption is growing, it still has a long way to go before it becomes mainstream. This slower-than-expected market adoption could delay the profitability that investors are hoping for.
Additionally, tech obsolescence is a looming risk. With the rapid pace of technological advancement in the EV space, there’s always the potential for existing technology to become outdated quickly. If Ola Electric doesn’t stay ahead of the curve, it might lose its competitive edge.
Is Ola Electric’s Service Really That Bad?
One of the biggest criticisms of Ola Electric has been its after-sales service. Many customers have reported negative experiences with servicing their vehicles, which has affected the company’s reputation. However,
Citi has suggested that this issue may resolve itself as the company scales up and improves its supply chain.
While the service issue might deter some customers, it could be a temporary problem. If Ola Electric invests in enhancing its service infrastructure,
this could help restore consumer confidence and potentially boost the stock.
Price Target and Stock Valuation
Citi’s price target for Ola Electric’s stock is ₹90, implying a 22% upside from its last closing price of ₹76. However, it’s important to note that the company is not yet profitable at the EBITDA level. Due to this,
Citi has used a sales-based valuation approach to arrive at this price target.
For investors, this means that while the potential for growth is high, they should be prepared for a bumpy ride. Profitability will not come overnight,
and it may take several years for Ola Electric to become a truly profitable company.
Analysts’ Take on Ola Electric’s Stock
Currently, seven analysts cover Ola Electric, with five of them recommending a “buy” and two advising a “sell.” This mixed sentiment reflects the uncertainty surrounding the company’s ability to overcome the challenges mentioned above. While the future looks promising for Ola Electric, the risks involved mean that investors should approach with caution.
Ola Electric Share Price: What’s Next?
Looking ahead, Ola Electric has the potential to continue its upward trajectory, but only if it can address its key challenges. With a strong market share, a wide range of products,
and a new platform on the horizon, there’s a lot to be optimistic about. However, issues with service quality, competition, and profitability remain significant hurdles.
For those considering investing in Ola Electric, it’s crucial to weigh the potential rewards against the risks. The Ola Electric share price has shown some promise,
but investors should remain cautious and monitor the company’s performance closely.
Read More: Ola Electric Takes a Giant Leap with the New Ola Gig Electric Scooter
Conclusion
In conclusion, Ola Electric’s stock offers an intriguing investment opportunity, but it comes with its fair share of risks. While the company’s market share, product portfolio, and R&D focus provide a strong foundation for growth, challenges related to competition, service quality,
and profitability could impact the company’s future. For investors, keeping an eye on the Ola Electric share price and its performance in the coming months will be crucial in determining whether this is a worthwhile investment in the long run.
