MVST Stock Is Good Bet for Bargain Hunters, Prime Short Squeeze Target

Microvast (MVST) stock fell by nearly 4 percent on Aug. 10 and lost another 10 percent on Aug. 11. MVST shares have retreated more than 53 percent from their peak. What's the forecast for MVST stock and will it go back up?

On July 26, electric-vehicle battery maker Microvast went public through a reverse merger deal with the blank-check company Tuscan Holdings (THCB). Microvast received nearly $822 million in gross cash proceeds through the business combination, which valued it at about $3 billion. BlackRock, Koch Strategic Platforms, and Oshkosh Corporation participated as PIPE investors.

MVST stock skyrocketed last week after President Joe Biden’s Rose Garden speech. Biden has set a goal that half of all vehicles sold in the U.S. be electric by 2030. That was followed by bullish social media chatter, which pushed the stock 17 percent higher on Aug. 9. These significant returns tempted some investors to book profits, which pulled down MVST’s price.

On Aug. 3, Morgan Stanley analyst Adam Jones initiated coverage on Microvast with an underweight rating and target price of $6. This implies a downside potential of 49 percent from the last closing price. In a research note, Jones said that the company’s vertically integrated business model faces higher execution, competitive, and in-sourcing risks.

Microvast expects to post revenues of $230 million in 2021 and $2.3 billion in 2025. The projected revenues imply a 2021 price-to-sales multiple of 15.7x and a 2025 price-to-sales multiple of 1.6x. Microvast is more established than EV battery maker QuantumScape, which expects to start generating revenue in 2024. Romeo Power trades at a 2021 price-to-sales multiple of 37.1x.

MVST stock has become the most mentioned stock on Reddit’s WallStreetBets forum. A post on the forum touted the company’s competitive advantage and solid partnerships over its competitors. It also mentioned a conservative target price of $25 by 2023. This prompted retail traders to purchase its shares, which caused the stock to surge.

According to Fintel, MVST had a FINRA short volume ratio of 50.7 percent on Aug. 11. Several retail traders are betting on a short squeeze in the stock. A high short volume combined with fundamental strength as an EV play makes MVST a prime short squeeze target.

I think that Microvast stock should recover since the company’s long-term prospect is promising. It's the leading lithium-ion batteries manufacturer for commercial and specialty vehicles. Earlier this year, Microvast entered into a joint development initiative with truck manufacturer Oshkosh on future battery and technology development.

Microvast is at the core of the large addressable market because batteries make up around 40 percent of the value of an EV. Its total addressable market is worth $30 billion by 2025, primarily driven by growing EV penetration.

Between 2020 and 2025, Microvast expects its revenues to grow at a CAGR of 87 percent. Its adjusted EBITDA is projected to reach $465 billion by 2025. The company’s adjusted EBITDA margins are estimated to expand to 20 percent by 2025 from 5 percent in 2021.