Arrival (NASDAQ: ARVL) is an electric vehicle manufacturer that primarily produces lightweight commercial vehicles such as buses and vans. It plans to price its EVs the same as its petrol and diesel equivalents. With van production coming soon, I will be assessing whether to buy more shares in this EV growth stock for my portfolio.

Electrifying prospects

Arrival has created a standard electric vehicle platform that allows it to save costs. This is because the platform serves as the foundation for multiple vehicle categories such as buses, vans, and cars. This, paired with the EV manufacturer’s groundbreaking microfactory concept, makes its manufacturing process extremely efficient. Its microfactories have interchangeable cells, allowing for production of different vehicles, and up to 10,000 vans a year. Therefore, production can be executed on scale without the need for building massive factories.

Arrival has already secured orders from several companies such as UPS, LeasePlan, and FirstGroup. Its number of letter of intents (LOI) also saw a monumental increase to approximately 134k vehicles in its latest earnings report. This goes to show that the firm is gaining traction from renowned companies globally with plenty of tailwinds.

UPS and downs

Arrival’s biggest customer by far is UPS, which is also an investor in the business itself. The courier giant placed an order for 10,000 vehicles last year, with an option for a further 10,000. Management disclosed that it expects the start of production on its Arrival vans in Q3 this year. UPS also announced on its earnings call that it’s expecting 400 to 600 vans to be delivered by the end of the year. Nonetheless, the next hurdle the EV firm faces is getting its van certified. It expects this to be completed by Q2.

As a shareholder, I will admit that I am slightly worried. The expected production numbers this year are lacklustre to say the least. With the company continuing to burn cash without any revenue, 400 to 600 vans isn’t going to cut it. Although CFO John Wozniak mentioned that Arrival expects to end the year with $150m in cash, he also reiterated the firm’s intention to raise capital in the near future. This is to allow Arrival to scale production to meet its ever-increasing LOI numbers.

The Arrival share price is already sitting at penny stock levels, so any equity funding would be a waste at this price. As such, the company will most likely have to take on debt, which isn’t ideal in a high interest environment.

Delayed arrival

To add to my worries, Arrival is yet to announce the confirmation of its bus certification. This was expected to be completed by Q1. Additionally, the company has also postponed the release of its full financial results twice. These factors don’t bode well for its reputation. As a result, I am worried that Arrival may not even be able to hit its van production targets. Consequently, due to Arrival’s complacency, I will not be looking to buy more shares in this EV growth stock for my portfolio.

The post Could this EV growth stock be about to explode? appeared first on The Twelfth Magpie.

More reading

• How to buy growth stocks at below-market prices
• Are Meta shares at the start of a comeback?
• With dividend yields averaging above 7%, are these 2 UK shares worth considering?
• How much do you need to invest in dividend stocks to be able to retire?
• FTSE 250 stock CMC’s shares have rocketed 51%! What’s going on?

John Choong owns shares of Arrival at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s fair to say that 2022 probably hasn’t started well for most investors. Then again, my heart does go out to anyone holding NIO (NYSE: NIO) stock in particular. The value of the Chinese electric vehicle (EV) maker has tumbled 38% year-to-date. But does this make it a buying opportunity for me?

NIO stock: is the drop overdone?

As one might expect, the capitulation of NIO’s share price isn’t down to one single factor. The crackdown by Chinese regulators on US-listed stocks hasn’t been warmly received by the market. The rise of the Omicron variant has also kept traders on their toes, as has the threat of earlier-than-expected rises in interest rates.

Even so, the fall in the price of NIO does seem overdone considering that it recently reported delivering 10,489 vehicles in December. That’s a near-50% jump compared to the same month in 2020. In November, the company also announced a Q3 loss narrower than that predicted by analysts.

Where next?

There are reasons for thinking the worst is over if it’s able to hit its own targets. As things stand, somewhere between 23,500 and 25,500 vehicles are expected to be delivered in Q4, comparing favourably to the 17,000-odd achieved one year ago.

Excitement over new vehicles could also lead to the company surprising on revenue. This stands at between $1.455bn and $1.568bn for the current quarter, compared to ‘just’ $1.017bn in 2021. 

Having said this, there’s no rule that says NIO stock won’t fall further. It’s clear that the global shortage of semiconductors won’t be fixed in a few weeks. And while it has already warned this will affect sales growth, NIO could be forced to revise its numbers in the next update.

It may also continue to be a victim of circumstances beyond its control. These include the ongoing rotation into value stocks that’s been apparent since the beginning of the year.

Competition hots up 

But there are other reasons I’m wary. For one, competition in the EV space will surely only get hotter as more established manufacturers catch up with the pioneers. NIO may emerge a victor but I don’t have the specialist knowledge to be able to say how likely this is. And as an investor, it’s never a great idea to leap beyond one’s circle of competence.

Another drawback is that a new car will never be considered an essential purchase. In other words, many of us can elect to keep our existing vehicles during troubled times. Sure, the arrival of legislation forbidding the sale of petrol and diesel cars from 2030 will force the adoption of EVs in the UK at least in the end. But how frequently do I plan to replace my car after that? Not very often.

Story stock

I don’t blame anyone for getting excited about NIO stock and the EV revolution in general. There aren’t many more seismic investment themes right now. 

Nevertheless, the huge selling pressure seen over the last 12 months serves as a reminder that a compelling growth story isn’t enough when the market hits an inevitable sticky patch.

Ultimately, NIO must be seen to be pulling ahead of the competition if it’s to recapture its lost form. I’m prepared to wait for that moment, if it comes at all, before putting my money to work here. In the meantime, I’ll get my exposure to EVs via this immensely popular fund.

The post What’s going on with NIO stock? appeared first on The Twelfth Magpie.

More reading

• Down 87.9% in 5 years, is this growth stock finally worth buying in May?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Sadly, I’m not one of those shareholders, aside from my holding via Scottish Mortgage Investment Trust. Should I be taking a leap of faith and buying the shares myself?

Tesla stock: worth the risk?

There’s certainly no shortage of reasons for thinking the Tesla share price can continue ascending. The company has quickly become the poster child of the electric vehicle revolution. And thanks to the headlines generated by Cop26, our adoption of these cars may be even swifter than previously thought.

Despite past concerns, the company’s financial situation is clearly improving as well. Tesla’s latest Q3 update revealed a 57% rise in revenues to $13.8bn. Net income also hit $1.62bn — almost 400% higher than over the same period in 2020. 

Having said this, it’s also not hard to find reasons — both general and specific — for steering clear. 

Even though there’s no rule to say they can’t keep rising, US stock valuations are looking very frothy indeed. And with businesses across the globe struggling with supply chain disruption and higher costs, the risk/reward trade-off looks increasingly unfavourable for tech stocks in particular.

Musk’s behaviour also continues to raise eyebrows. Only today, it was confirmed that the visionary leader had sold $5bn of shares in his own company after conducting a poll on Twitter. This move has worried investors and helps to explain why Tesla stock has fallen 13% in value in the last five trading days.

Naturally, Musk won’t care. As a Fool with finite capital, I can’t afford to be so relaxed.

Better buy?

Of course, Tesla isn’t the only way of getting exposure to the automotive industry. Actually, I think online marketplace Auto Trader (LSE: AUTO) might offer a far more comfortable ride.

Today, the FTSE 100 member announced it had achieved its best-ever set of six-monthly revenue and profits figures. At £215.4m, the former was 82% above that achieved over the same period in 2020. It was also 15% above that logged in the year before the pandemic struck. Helped by record spending by retailers, operating profit soared 121% to £151.7m, with margin rebounding to a staggering 70%. 

While Tesla’s crown may slip eventually, I’d say AUTO’s ongoing dominance looks more assured. Today, it reported a 14% increase in ‘cross-platform minutes per month’ to 633 million. This represents over 75% of the whole market. Put another way, car buyers spend almost nine times more time on Auto Trader’s site compared to its nearest competitor. 

One for the traders

Taking all this into account, it’s perhaps no surprise that the AUTO share price soared over 11% in early trading, justifying my bullish call last month.

While this pales in comparison to Tesla’s recent performance, the fact that the £6bn-cap’s business model is based on recurring revenues lends it far better visibility, in my view. What’s more, the company’s ability to serve all vehicle buyers gives it a defensiveness that Musk’s company lacks.

Chuck in consistently high returns on capital and a bullet-proof balance sheet and I continue to regard AUTO as a great UK growth share. As superb as returns have been, I’ll leave Tesla stock to the traders. But I’d buy AUTO.

The post Tesla stock has soared. But is this FTSE 100 share now a better buy? appeared first on The Twelfth Magpie.

More reading

• Up 28% in weeks, could Tesla stock go even higher?
• If at 40-years-old you put £500 a month into S&P 500 shares, here’s what you could have by retirement

Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Auto Trader. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The bull case for NIO 

Looking at the latest report from the firm shows me some encouraging numbers. Vehicle sales totalled $1.2bn for Q2 2021. This was up 6.8% from the previous quarter, and 127% compared to Q2 2020. The vehicle margin also increased over 10% since Q2 2020 which shows me the firm is expanding operations effectively. NIO is still a loss-making company, however, the net loss of $90m from Q2 this year being down 30% from the previous quarter and 50% from a year ago.

When I last covered the NIO share price in June, the firm’s results were similar. And the fact that the company is consistently expanding gives me confidence in its future growth. Moving forward, this consistency is what I think should make it stand out in the competitive EV market.

In May, it announced it would be expanding into the European market, starting with Norway. Charging equipment is currently being deployed as the firm’s ES8 SUV was approved for mass production across the continent. In addition to this, there are rumours that Germany will be the next expansion target, after a ‘General Manager of NIO Germany’ job was posted online. Its global design centre already operates out of Munich, so this seems feasible. If successful, I expect this expansion to be mirrored in a rising NIO share price.

The bear case for the stock 

The EV market is becoming fiercely competitive. Big names like Ford and General Motors have set aside billions of dollars for EV R&D over the next few years. Bigger firms with better margins and more established infrastructure will be hard to compete with and the company will have to fight to maintain any market share.

In addition to this, the global semiconductor shortage is still posing problems for the wider EV market. The shortage has already affected the firm, as it had to pause production between March and April this year, leading to a loss of 1,000 vehicles (around $60m). It must compete against much bigger firms to maintain chip supply if it wants to continue its strong growth.

I think the current NIO share price dip could be a buying opportunity. Although the firm does have challenges it must face moving forward, I feel it’s impossible to ignore the strong, consistent growth of the firm. As a current investor, I am monitoring the short-term movements and considering topping up my portfolio with additional shares.

The post Should I buy the NIO share price dip? appeared first on The Twelfth Magpie.

More reading

• Down 87.9% in 5 years, is this growth stock finally worth buying in May?

Dylan Hood owns shares in NIO Inc. The Motley Fool UK owns shares of and has recommended NIO Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What is the BlackRock World Mining Trust?

As the name suggests, this fund is dedicated to owning companies that explore, extract and sell key metals and minerals needed across the globe. 

Unsurprisingly, the portfolio’s major holdings are some of the biggest miners going. Brazilian giant Vale features heavily, as do FTSE 100-listed firms, BHP Group, Anglo American and Rio Tinto. While 40% of assets are invested in mining firms that source a number of metals, 20% of the fund is invested in copper plays. Almost the same amount is devoted to gold miners.

Naturally, an actively-managed investment trust means fees. Based on its most recent fact sheet, BRWM charges 0.9% a year to manage holders’ money. 

Why is it getting popular?

I think there are two reasons why this investment trust is in demand. First, there are fears over inflation and demand for safe-havens. Mining companies are one example of the latter.

The thinking behind this is that prices tend to rise when economies are flying. Since more things are being made, it makes sense to back those companies who provide the materials needed to make them.

The second reason why the Blackrock World Mining Trust might be proving popular is the excitement surrounding renewable energy sources and electric vehicles. The fact that these featured heavily in the $2trn spending plan announced by US President Joe Biden back in March shows how hot these themes will be going forward. It’s clear that vast amounts of metal will now be needed to bring everything to fruition.  

Both of the above should prove to be tailwinds for miners. A rise in demand should lead to higher earnings. Higher earnings should boost share prices and investor returns. A boost to investor returns should, rather neatly, provide some protection from the aforementioned inflation. 

I’d also expect more dividends for shareholders. As things stand, this investment trust offers a yield of 3.2%. That’s lower than you could get from buying some of the individual miners from the FTSE 100. However, payouts will arguably be obtained at a lower level of risk. 

Should I buy?

Based on future prospects, I find the case for investing in BlackRock pretty compelling. Even so, it pays to consider the flip side. 

If concerns over inflation subside, those already holding could flee the investment trust and recycle their profits into growth stocks again. Even if this doesn’t happen, there will always be some who want to bank gains. It’s also worth remembering that commodity investing can be an ‘interesting’ ride, even when times are good. 

Personally, I’m fine with above-average volatility, so long as I know I can stay on board for the long term. And, even if (when) the investment trust does temporarily dip in value, that dividend stream should compensate. If I’d held the shares, I’d simply receive, reinvest and repeat. Yes, the ongoing charge is on the high side, but the diversification aspect makes me think BRWM is worth the cost.

With a potential commodity supercycle on the way, I’m sorely tempted to begin building a position in this investment trust in haste.

The post This investment trust is soaring in value. Should I buy in June? appeared first on The Twelfth Magpie.

More reading

• How to buy growth stocks at below-market prices
• Are Meta shares at the start of a comeback?
• With dividend yields averaging above 7%, are these 2 UK shares worth considering?
• How much do you need to invest in dividend stocks to be able to retire?
• FTSE 250 stock CMC’s shares have rocketed 51%! What’s going on?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Chinese electric car powerhouse NIO (NYSE: NIO) saw its shares dip in value yet again yesterday. The NIO share price had seen an explosion at the start of 2021, reaching a high of $62 in early February. However, broader concerns about the global shortage of semiconductors have triggered a sell-off among automotive investors.

The falling NIO share price

NIO was one of many automotive shares whose share value slumped on Tuesday. Ford and Tesla also saw drops of 2% and 1.6% respectively. This was due to growing worries over the global semiconductor shortage. The problem initially arose due to factory closures forced by the pandemic last year. However, since production has reopened, there has been a huge surge in demand for semiconductor chips, outweighing the current supply. As a consequence, NIO suspended production for five days between March 29 and April 2, which is likely to equate to a loss of production of between 500 and 1,000 vehicles for the year.

Another reason for the fall in share price is the rise in bond yields the UK and US have seen in recent months. The US 10-year treasury note has risen 67% year-to-date. Bond yields have been historically low for the past 15 years, which leads to hefty stock valuations. As bond yields rise, such valuations tend to lose steam. In addition to this, rising interest rates increase payments on all debts, which makes it harder for businesses to borrow money for growth. This is a large factor behind the tech sell-off that has occurred in the last few months, affecting the NIO share price directly.

Strong Q1 results

All that being said, NIO’s Q1 results in late April did boast some encouraging numbers. Compared to Q1 2020, deliveries were up from 3,838 to 20,060. This marked a sales increase of 489.8%! Gross profit was also up 36.2% from Q4 2020, which is music to any investor’s ears. Net losses also fell to just over £50m, which is a continuation of the firm’s decreasing losses. These ‘positive’ results helped push the NIO share price up to $40 in the week after the report was issued.

CFO Steve Fung also highlighted that more customers are opting for longer-range battery packs and the NIO Pilot Driver Assist System. This helped boost gross margins to 21.2% for Q1, marking a huge year-on-year increase from the -7.4% margin for Q1 2020. CEO William Li has said that the additional cash from increased gross margins will be ploughed back into future technology and other user services. This gives me optimism for the future of the firm.

The Verdict

The reason the NIO share price fell is a combination of the global semiconductor shortage and rising bond yields. NIO is not alone in its semiconductor supply struggle, with many other automotive shares struggling to get their hands on chips. However, the recent Q1 results present a lot of reasons to be bullish about this stock. NIO has proved its scalable business plan, however, future share prices are likely to rest on semiconductor availability.

The post Here’s why the NIO share price fell yesterday appeared first on The Twelfth Magpie.

More reading

• Down 87.9% in 5 years, is this growth stock finally worth buying in May?

Dylan Hood owns shares in NIO Inc. and Tesla. The Motley Fool UK owns shares of and has recommended NIO Inc. and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

NIO (NYSE: NIO) stock has now fallen by a little over a third from its high of a little under $63 back in February. Today, I’m questioning whether now’s the time to load up on this undeniably exciting growth play.

NIO stock: opportunity knocks?

NIO’s fall from grace shows just how quickly market sentiment can change. From this time last year to February, the share price climbed a quite staggering 1,800% to just under $63! Since then however, it’s tumbled to just above $41 a pop. What’s going on?

The chief reason for stock’s decline is arguably not of the company’s making. The global chip shortage has impacted many hot tech stocks and this is likely to continue for the rest of 2021. That’s problematic for the Chinese electric car maker, especially given the encouraging progress it’s made on rapidly upscaling production over the last year. 

We also need to consider whether the decline of NIO stock may be partly due to the fall in US rival Tesla‘s (still probably absurd) valuation. A drawback of being in a hot space like electric vehicles means that all company share prices tend to rise and fall in tandem.

On top of this, NIO simply isn’t selling anywhere near the same amount of cars as Tesla. That’s ironic considering the latter’s sales figures are still far lower than traditional manufacturers. And while the chip shortage will be resolved, competition in this space won’t get any easier. 

All this makes me think that NIO’s fall may not be complete, especially if the perpetually frothy US market were to cool. Despite enduring a similarly tough time, I think there’s another automotive-related share worth buying. What’s more, it’s UK-listed! 

Contrarian pick

Today’s interim numbers from AB Dynamics (LSE: ABDP) haven’t been welcomed by the market. As I type, the share price of the testing systems supplier is down 8%. 

This is understandable. Revenue came in at £27.3m over the six months to the end of February. That’s a slight improvement on the second half of 2020. However, it’s still below the £34.7m achieved in H1 2020. Statutory operating profit of £1.4m was also less than half the £3.6m achieved over the same period in 2019/20.  

That said, I remain optimistic. Order intake improved over the period as confidence returned among AB’s customers. Although most definitely not an income stock, the payment of dividends also suggests confidence in the medium-term outlook. In the meantime, AB boasts a solid balance sheet with net cash of £33.1m. 

Naturally, the rebound will take time, especially if the UK experiences a third wave of the pandemic. As CEO Dr James Routh reflected this morning: “Visibility remains limited and there remains short-term uncertainty as to the shape and rate of the recovery.”

Factor in some Brexit-related concerns and today’s share price dip makes sense. 

Solid hold

For me however, the growth opportunities in this space remain compelling. AB already serves the top 25 global manufacturers and is a trusted leader in its niche market. As a ‘picks and shovels’ play on the electric and autonomous vehicle market, I think it’s a great option.

By now, you’ll have gathered I’m happy to continue holding my shares. But I’m less inclined to think NIO stock represents the opportunity of a lifetime just yet.

The post NIO stock is down over 33%! Is this the opportunity of a lifetime to buy? appeared first on The Twelfth Magpie.

More reading

• Down 87.9% in 5 years, is this growth stock finally worth buying in May?

Paul Summers owns shares of AB Dynamics. The Motley Fool UK owns shares of and has recommended NIO Inc. The Motley Fool UK has recommended AB Dynamics. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, a rise in US bond yields has caused a large-scale tech stock sell-off. Rising yields are a key indicator of inflation, which erodes the future value of company earnings.

Though this may cause concern for investors, I’m taking advantage of cheaper share prices to top up on three US tech stocks I already hold.

#1. Palantir Technologies: data analytics

Palantir Technologies (NYSE: PLTR) specialises in data gathering and analytics. Its share price peaked at $39 in January 2021, up from $9 in October 2020.

The company offers three different data services, Gotham for governments, Foundry for corporate firms, and Apollo, which manages the two. Its Gotham government contracts provide a stable long-term income. In 2020 the company saw 47% revenue growth to $1.1bn, with 2021 forecasts expecting a similar figure.

However, the current price-to-book (P/B) ratio is around 28, signalling this stock could be overvalued. This is a risk for any investor buying now. For context US tech stock Microsoft trades on of P/B ratio of around 13. However, data collection is only going to accelerate in coming years, as the world increasingly shifts towards technological dependence. Therefore, I expect this stock to have a strong future and will buy more.

#2. NIO: Chinese electric travel

NIO (NYSE: NIO) is a Chinese electric car manufacturer. Its share price surged over 1,100% in 2020. Though the shares are down, this US-listed tech stock does boast some encouraging numbers. One example is the 113% year-on-year increase in production in 2020. It also has a much lower P/B ratio of 13.4, compared to industry leader Tesla’s 28.3. This indicates the current share price could be undervalued comparative to the industry giant.

However, if this US tech stock wants to become a front runner in the electric vehicle industry it will have to fend off some fierce competition, which is a risk that can’t be ignored. Ford has pledged $11bn for electric vehicle research from 2018-2022 and General Motors has set aside as even larger $27bn.

However, as a current investor I’m bullish about this US tech stock’s future growth. I’ll be buying more shares for my portfolio.

#3. Jumia Technologies: African e-commerce

Often referred to as “the Amazon of Africa”, Jumia Technologies (NYSE: JMIA) is a Nigerian e-commerce company. After its IPO in April 2019, this stock suffered some huge cash flow issues with operating losses exceeding revenues. However, throughout 2020 its share price exploded from just under $3, to peak at $65 per share in early February 2021.

With Africa’s lack of infrastructure, e-commerce has been largely overlooked as a viable business plan. Google owner Alphabet and Facebook are two US tech stocks that have announced plans to provide all of Sub-Saharan Africa with internet connections. If these projects are successful, I feel it would put Jumia in a great spot. Jumia’s conservative $4bn market cap also offers room for encouraging upside potential. I’m bullish about this US tech stock’s potential and, again, I’m going to add to my existing holding.

The post Why I’m buying these 3 US tech stocks today appeared first on The Twelfth Magpie.

More reading

• 3 crazy Nasdaq growth stocks I’m avoiding like the plague in June
• Down 87.9% in 5 years, is this growth stock finally worth buying in May?
• While everyone’s piling into AI infrastructure stocks like Micron and SanDisk, consider these out-of-favour Nasdaq 100 names
• Should I dump Duolingo from my ISA and buy Palantir stock instead?
• Palantir stock: I’m buying the dip after this week’s blowout Q1 earnings

Dylan Hood owns shares in Jumia Technologies, Palantir Technologies, and NIO. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Facebook, and NIO Inc. The Motley Fool UK owns shares of Palantir Technologies Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So why did the share price surge? Will it continue to do so? And should I be adding the stock to my growth portfolio? Let’s take a look.

A mining company in distress?

As previously stated, Premier African Minerals is a mining business. It digs up tungsten from the ground. But in 2019 that’s not what happened. Due to a complication with Zimbabwe’s National Indigenisation and Economic Empowerment Fund (NIEEF), PREM’s tungsten mine became fully impaired. In other words, it’s currently non-operational, and the management team said it will remain that way until the matter with the NIEEF is resolved.

Consequently, the business generated no revenue in 2019, and the mine is still non-functional today. Needless to say, this isn’t exactly good news. So why did the share price suddenly start climbing?

It seems that PREM finally caught a break and was granted a three-year Exclusive Prospecting Order (EPO) in Zimbabwe. This agreement enables the firm to begin exploring a large area of land that is expected to contain up to 80 million tonnes of lithium oxide — an essential ingredient for electric vehicle batteries.

Given the limited supply and rising demand for the metal, this presents a fantastic opportunity for PREM and its share price. But let’s not get ahead of ourselves here.

The risks are high

The EPO is an exploration license only. Its purpose is to allow mining companies to find suitable sites to start digging in the future. As it stands, PREM doesn’t have any active mines, and its new lithium sites will take a good couple of years before becoming active.

During that time, many things can go wrong. Its tungsten operation (or lack thereof) is proof of that. Developing new mining sites and maintaining existing ones is an expensive process. PREM is not currently generating any revenue and has less than $40,000 of cash on its balance sheet. So the business is entirely dependent on outside funding that may not be available in the future.

What’s more, the mining industry worldwide is subject to numerous regulations designed to protect workers’ safety, the environment, and local economies. However, Zimbabwe is not the most politically stable country, exposing PREM to the risk of sudden regulatory change that may significantly impact its share price.

PREM share price: time to buy?

Securing the EPO is undoubtedly a good development for the firm. It most definitely adds more value to the business, and over the long term, could be a catalyst for the share price to keep on climbing.

But with no revenue, plenty of expenses, and a long road ahead to becoming profitable, the risks are exceptionally high, in my opinion.  Personally, I think the rise in PREM’s share price is a bit premature. Therefore, I won’t be adding the stock to my portfolio today.

The post Will the PREM share price keep climbing? appeared first on The Twelfth Magpie.

More reading

• How to buy growth stocks at below-market prices
• Are Meta shares at the start of a comeback?
• With dividend yields averaging above 7%, are these 2 UK shares worth considering?
• How much do you need to invest in dividend stocks to be able to retire?
• FTSE 250 stock CMC’s shares have rocketed 51%! What’s going on?

Zaven Boyrazian does not own shares in Premier African Minerals. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So, what is this hot stock and why is it the flavour of the month? And should I lock in gains or buy more for my ISA? Here’s my take.

The soaring SEE share price

The name of the company in question is Seeing Machines (LSE: SEE). The Canberra-based business develops and supplies tech that monitors levels of fatigue and distraction in drivers. But we’re not just talking about cars here. The adaptability of its products means that Seeing can have its fingers in many sector pies, including off-road, fleet and aviation. 

As one might expect when it comes to the adoption of new technology, however, progress has felt painfully slow at times. Multiple fundraisings have tried investors’ patience, as has the ‘pop and drop’ behaviour of the share price. That said, many owners of the stock are, like me, perhaps in a more forgiving mood these days, I feel.

The gains seen in the SEE share price over the last few weeks appear to have been in anticipation of news released yesterday. This relates to confirmation that the company will partner with US computing giant Qualcomm Inc in designing a driver monitoring system. Perhaps most importantly for those already invested, CEO Paul McGlone stated that Seeing expects this relationship “to deliver significant incremental volume” on top of its existing business plan.

Having seen my stake in Seeing Machines rise so spectacularly since the beginning of 2021, I’m now left with a quandary.

Should I sell now or buy more?

One argument for selling is that some traders will seek to lock in some profit soon. This will likely make the SEE share price volatile or certainly more volatile than your typical FTSE 100 stock. 

As mentioned earlier, this is nothing new to those already invested. Back in June 2018, Seeing hit a share price high of almost 13p. In less than 12 months, it was back down at 3p. In the March 2020 market crash, it fell to as low as 1.7p. This is most definitely not a share for the faint-hearted. If I was a prospective investor now, I’d definitely go in with my eyes open. 

On the other hand, I find it hard to overlook the importance of SEE’s tech. Based on over 20 years of research, its AI driver safety systems already save lives and should continue to do so as safety features are mandated around the world. The link with Qualcomm could also lead the AIM-listed company to hit the radars of tech-obsessed investors across the pond. This could usher in more buying and more share price momentum. On a long enough timeline, I can even imagine the company being of interest to a deep-pocketed suitor. Not that such an outcome can be guaranteed, of course.

Staying diversified

I suspect I will retain my full position for now. But I need to ensure my position doesn’t become too large relative to my other holdings. A concentrated portfolio where only a few stocks dominate can be very risky if some fail. Some diversification is essential. 

For now, however, I’ll simply toast this development and salute the recent uplift in the SEE share price. 

The post The SEE share price is up 75% in January. Should I sell this hot growth stock now? appeared first on The Twelfth Magpie.

More reading

• How to buy growth stocks at below-market prices
• Are Meta shares at the start of a comeback?
• With dividend yields averaging above 7%, are these 2 UK shares worth considering?
• How much do you need to invest in dividend stocks to be able to retire?
• FTSE 250 stock CMC’s shares have rocketed 51%! What’s going on?

Paul Summers owns shares of Seeing Machines Ltd. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.