Cenntro Electric Group (NASDAQ:CENN) shares are short circuiting after CEO Peter Wang advised an abundance of caution on risks facing the company in coming quarters.
The New Jersey-based EV technology company reported solid growth in the headline figures for the full year report. While still notching a net loss on GAAP terms, the company increased units sold by about 30%, increased revenue year over year, and raised gross margin by 17.5% despite adverse conditions. Additionally, the firm raised its cash pile to $261.1 million, up significantly from a paltry figure of only $4.5 million a year prior.
However, shares reversed course shortly after the CEO began speaking and highlighting supply chain risks, issues in the concentration of manufacturing in China, and problems moving increased inventory.
“We, like almost all other EV companies, are concerned with the challenges in the global supply chain and in shipping sectors,” Wang said. “While we believe we can navigate these challenges, we continue to exercise a strong degree of caution and continue to incorporate localization into our supply chain.”
He added that the chip supply chain and battery bottlenecks are the primary issue for the company, but are exacerbated by the company’s reliance upon suppliers in China. These major concerns prevented the company from offering firm forecasts on the road ahead and, in turn, appeared to sour market reaction to the results.
While shares began the conference call near $1.90 per share, the stock plummeted to near $1.60, about a 15% drop that more than reversed bullish action in Monday’s regular session.
Also of note was the fact that despite increasing units sold by 30% from 2020, the total units sold still only accounted for just over 50% of vehicles produced in the year. As a result, execution risk appears to be rearing its head.
“We do have a lot of so-called backlog, the interest indication and, in this moment, our key is to make sure we can deliver on time,” Wang explained. “The demand is not an issue. The order is not really the issue. The issue is how we can deliver the product with quality, with time and with the aftermarket to support.”
Shares fell over 14% in extended trading on Monday.
Read the full transcript of the earnings call.