Polestar stock: opportunity for profit or guarantee of loss?

Last Updated: 12. Februar 2024By

The transformation to electromobility is not really succeeding. In the crisis years 2020 to 2022, with the shortage of semiconductor products and disrupted supply chains, customer demand exceeded production volume. By the time delivery could finally be made, inflation had risen sharply, making people less interested in expensive electric cars. Sales plummeted. The e-party seems to be over.

Tesla lowered its prices approximately 20 times last year. Ford reduced production of the previously popular electric F150 truck. Car rental company Hertz plans to sell around 20,000 electric cars due to low demand. Electric car sales in Germany are expected to decrease for the first time since 2016 – by 10 percent.

The electric car slump is hitting all automakers hard, with smaller electric car companies facing massive problems. This includes Polestar (WKN: A3DP4R). The company has not gained much momentum since going public, with its stock price dropping by 60 percent in 2022. Just two years ago, the company was worth around $10 billion, but now it is only worth around $4 billion. Can investors find a bargain here?

Polestar, Source: Aktien Screener Investor Verlag Chinese automaker Geely steps in It is clear that Polestar is struggling, and this is partly due to the fact that its major shareholder, Volvo, is also facing problems. In the first nine months of 2023, Volvo had to manage a negative operating cash flow of $1.3 billion. This issue has now been resolved. The Swedish car company will transfer some of its Polestar shares to Chinese automaker Geely. Geely founder Li Shufu already holds 39 percent of Polestar, and with a 79 percent stake in Volvo, Geely is its largest shareholder.

For you as an investor, the question now is whether you should invest in Polestar like Geely did.

Is there a profit opportunity hidden in the disaster? Analysts are skeptical. Experts from SEB Bank stated that they can no longer properly evaluate the company due to the amount of money being burned. An analyst from Bernstein even rendered a particularly damning verdict. He said that Polestar was on a road to nowhere and should be taken off the stock market.

However, this devastating outlook could hold a profit opportunity for risk-taking investors, as: Due to the poor valuation, Geely could potentially buy out the entire company. This would benefit shareholders.

However, this is the only argument for investing. Otherwise, there is little good news to report about Polestar. The company sells few cars, incurs losses, and has only shown weak growth lately.

Nevertheless, the acquisition by Geely could be a risky but potentially lucrative opportunity. It is up to you to decide if the stock fits into your portfolio or not.