Ola Electric share price strategy: Investors and analysts alike are perplexed by the company’s meteoric surge in share price. However, they advise holding onto the stock since it is still purely a “momentum” play.
The stock has increased 92% (through August 19) over its issue price of Rs 76 since it was listed on August 9. This has resulted in a market capitalisation of just over Rs 63,000 crore. It was 4.45 times subscribed to.
“Ola Electric performed better than anyone could have predicted in such a short amount of time. The stock rose dramatically in the last three days after listing at par. It appears to be insanity, which defies logic. However, traders or investors need to use stringent stop-losses when chasing momentum, according to independent market expert Ambareesh Baliga.
The share price of Ola Electric reached an all-time high of Rs 146.03 per share on the BSE on Monday, August 19, after hitting the 10% upper circuit. The share’s circuit limit was lowered last Friday, August 16, from 20% to 10% following an incredible surge in just five sessions.
What then is driving the price increase of Ola shares?
According to Deven Choksey, managing director of DRChoksey FinServ, a significant portion of the purchase of Ola Electric stock in recent sessions can be attributed to institutions adding exposure to fresh stocks on the market and the substantial liquidity flows in the markets.
“We believe that the stock’s present values are a little stretched, as they appear to have factored in the majority of the developments. Investors who purchased shares at the IPO price might later enter at a cheaper price and book a partial profit, he noted.
The Red Herring Prospectus (RHP) for Ola Electric states that 82.74% of the outstanding shares are locked in, with the remaining 17.7% of the stock having free float.
Analysts, however, maintain that the company’s fundamentals are still questionable because it is a losing enterprise with high valuations. As a result, even though a correction today seems unlikely given the positive feeling in the market, any reversal in the overall trend of the market could lead to more aggressive stock selling.
“In the event that the markets correct by, say, 5%, the stock can still find support and manage to recover. However, a more severe decline in the markets may cause Ola’s share to underperform; in this case, the company’s and the stock’s fundamentals—which are lacking—will eventually need to provide support, Baliga warns.
From a financial standpoint, Ola Electric Mobility recorded a net loss of Rs 347 crore for the April–July quarter of Q1–FY25, compared to a net loss of Rs 267 crore for Q1–FY24.
However, year-over-year (Y-o-Y) revenue from operations climbed 32.3% to Rs 1,644 crore, with the automotive segment’s Ebitda margin rising 632 basis points to -1.97 percent.
Significantly, the company sought an EV/Sales multiple of 6.3x at the issue price of Rs 76, according to brokerages’ pre-IPO notes. This was a substantial premium over the peer average of 3.1x.
Ola’s projected growth
The global broking HSBC notes that Ola Electric’s development trajectory is unlikely to be linear in the foreseeable future, since the firm anticipates a much slower pace of electric vehicle (EV) penetration.
“The company said it expects electric two-wheeler (e2W) penetration to reach 41-56 per cent in financial year 2027-28 (FY28), while we expect it to be just 20 per cent by FY28 and 30 per cent by FY30,” the broking stated in a recent note.
Apart from that, Ola Electric, according to HSBC, might not be able to increase its market share because the competition is now just as aggressive; regulatory support in the form of subsidies might eventually disappear; and entering the battery manufacturing business could be dangerous because it might lose its competitive edge and strength of balance sheet if it can’t match the quality and yield of global players.
The brokerage’s target price of Rs 140 for the stock has already been exceeded.
In Q1 FY25, Ola Electric recorded the highest-ever number of car deliveries—1,25,198—compared to 70,575 during the same period the previous year.
Even though it’s widely accepted that the e2W market will grow significantly and Ola has promised to take control of the battery component internally, most benefits appear to be aggressively priced in. However, as more institutions buy up shares to increase their exposure to the sunrise industry, there may still be some movement in the stock, according to Nirav Karkera, head of research at Fisdom.