Today’s price action generally followed yesterday’s with many parts of the market returning to green. However, the electric vehicle (EV) sector stood out this week, with stocks of major EV players coming under heavy buying pressure. Phoenix engine (NASDAQ:ENP) is particularly feeling this bullish momentum, with PEV stock having more than doubled at one point today.
Interestingly, this move comes on little news. Phoenix Motor, a maker of electric vehicles and electric drive systems used in electric vehicles, recently went public two weeks ago. However, today’s surge has taken PEV stock to a new all-time high.
Now, after a given stock is listed, volatility is typical as investors attempt to place a fair value on the company. In the case of electric vehicle stocks, this may be more difficult to do. This is because many of these businesses are not yet profitable. As a result, forward-looking assumptions are needed for investors to work out their valuation models, as is the case with Phoenix Motor.
Let’s dive into what could be behind today’s move for PEV stocks.
Why is PEV stock doubling today?
Phoenix Motor has some rather intriguing developments that investors have been watching. Earlier this month, the company raised nearly $16 million through its public offering. This capital should be put to good use as Phoenix Motor ramps up its manufacturing capabilities.
The extent to which investors anticipate a faster ramp-up due to this injection of capital remains to be seen. However, public registration has some obvious advantages. The ability for shareholders to cash out – and for the company to raise funds in the future – is a benefit, especially for a capital-intensive company.
The timing of registration is also interesting. It’s not necessarily a good time for companies to go public, with investors factoring in much lower valuations. For this reason, Phoenix Motor may believe it is better positioned for long-term success than its peers. Time will tell us.
The fact that the whole electric vehicle sector is seeing renewed interest is probably the main driver of PEV stock today. As a higher leverage play, investors in the stock have amplified exposure to trends (both good and bad) in the EV space. Right now, that’s a good thing. However, as we have seen before, momentum can be cruel to investors.
As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.