REE stock continues to crash another 10%; The market does not believe the company’s predictions

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REE
-10.53%




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The Israeli REE was established in 2013 by the founders of Softville, Daniel Barel, who serves as CEO, and Ahashi Sardes, the company produces a platform that every car manufacturer can use, when various components in the car are integrated between the chassis and the wheels, including steering, braking, suspension, propulsion and control . This “flat” shape leaves the vehicle space with more flexibility in the design of the vehicle. Thus, delivery vehicles, for example, can free up space to carry more cargo, and more passenger cars can also be profited.

The company was issued in July of last year at a value of 3.6 billion dollars in the Spaq merger, as part of the big wave of IPOs and the hype in the markets – when any company could come with a dream and raise billions – and even managed to jump by 25% after the IPO. However, since then the market has managed to be severely disappointed with the SPAK method and drop most of these issuances by tens of percent, and REE did not escape this fate either. It is now trading at a price of 68 cents – a 95% drop from the IPO, a price that reflects its market value of only $164 million.

The company’s forecast was to invest in the coming years in building production capacity in various places in the world, including the United States, Europe and Japan. The money raised should be enough for the company to carry out its business plans for the coming years.

The advantage (which later became a disadvantage) is that companies that merge with Spak can bypass the regulation and publish forecasts, which a company that enters the stock market the high street, of an IPO, cannot do. So according to REE’s forecast, it expects revenues of $344 million in 2023, no less than $2.7 billion in 2024, a whopping $5.7 billion in 2025 and if that’s not pretentious enough then the company is talking about $10.4 billion in 2026.

The company’s EBITDA forecast is for 275 million dollars in 2024, a further jump to 904 million dollars in 2025 and then 1.7 billion in 2026. Here we are talking about growth rates of thousands of percent, and very high presumption.

Now, let’s get back to reality – the company’s legal year hasn’t started yet, but the market seems to be pricing in that the company’s pretentious predictions will not succeed. In the first half of 2022, the company registered 0 revenues (as mentioned, the company only expects to bring in money in 2023). On the other hand, the company recorded research and development expenses of $39 million, more than double the corresponding period. Administrative and general expenses were 26 million dollars. The company’s operating loss was $66 million, compared to $43 million in the same period last year.

The company’s balance sheet is relatively stable, the company has $206 million in cash, with no debt at all. And considering the fact that in the first half of 2022 the company burned 68 million dollars in cash, if the pace continues, (which Wall Street probably estimates) and the revenues do not arrive similar to the company’s forecast, the money in the coffers will last for about a year and a half.

The market probably understands that REE, according to the current situation, has little chance of meeting the company’s forecasts, especially in the challenging macroeconomic situation in the US and fears of a recession. In the current market environment where you need to reach profits and not just revenues – this is also about inflated forecasts that the market is not ready to buy as in the past.

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