On Friday, Citi issued a downgrade for Gogoro Inc. (NASDAQ:GGR) stock, shifting its rating from Buy to Neutral and significantly reducing the price target to $0.50 from the previous $2.30. This decision comes after Gogoro reported a decline in revenue and a net loss in its recent earnings.
Gogoro's revenue fell 5% year-over-year, coming in at $87 million, while the company's net loss widened to $18 million compared to a loss of $3 million in the third quarter of 2023 and $20 million in the second quarter of 2024.
The analyst from Citi attributed the disappointing performance to several factors including sluggish growth in electric two-wheeler (E2W) sales in Taiwan, which only saw a 1.6% increase year-over-year.
Additionally, the company experienced a drop in the average selling price (ASP) due to a higher proportion of entry-level model sales. There was also a noted decline in sales revenue from accessories, parts, and maintenance services.
Another contributing factor to the financial shortfall was an $11.1 million decrease in the favorable change in the fair value of financial liabilities. These liabilities are related to outstanding earnout shares, earn-in shares, and warrants.
Citi's downgrade reflects a cautious stance on Gogoro's stock, labeling it as Neutral/High Risk. The firm acknowledges that while the stock price may already reflect the company's fundamental weaknesses, the potential for significant upside appears limited. This assessment suggests a conservative outlook on Gogoro's near-term growth prospects.
In other recent news, Gogoro Inc. experienced a decline in Q3 revenue, reporting a total of $86.9 million, marking a 5.3% decrease from the previous year. The company also saw an expansion in its net losses, which broadened to $18.2 million.
Despite setbacks in the overall two-wheeler market in Taiwan, Gogoro's electric scooter registrations saw a 14.5% growth, demonstrating the resilience of its core business.
The company is now focusing on profitability and customer experience, while also planning to expand into new markets such as India. Gogoro has also announced plans for cost-saving initiatives in Q4 2024 and throughout 2025, with revised revenue expectations for 2024 ranging between $305 million and $315 million.
Despite a 10.6% decrease in hardware sales to $52 million, the company's battery swapping service revenue saw a 3.8% increase to $34.9 million. Gogoro maintains a strong cash position with $119.2 million available. These developments highlight the company's ongoing efforts to navigate operational challenges and focus on long-term growth and market expansion.
InvestingPro Insights
Recent data from InvestingPro aligns with Citi's cautious stance on Gogoro Inc. (NASDAQ:GGR). The company's market capitalization stands at $132.33 million, reflecting the market's current valuation of the firm. Gogoro's revenue for the last twelve months as of Q2 2024 was $333.94 million, with a concerning revenue decline of 8.31% over the same period.
InvestingPro Tips highlight several challenges facing Gogoro. The company is operating with a significant debt burden and may have trouble making interest payments, which could exacerbate its financial struggles. Additionally, Gogoro is quickly burning through cash, a factor that likely contributes to Citi's downgrade and reduced price target.
The stock's performance has been notably poor, with a 62.54% decline over the past three months and an 81.56% drop year-to-date. These figures underscore the market's growing skepticism about Gogoro's prospects, aligning with Citi's decision to downgrade the stock.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Gogoro, providing a deeper understanding of the company's financial health and market position.
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