Ola Electric's stock price rises after two consecutive sessions. Here is why

Ola Electric Mobility's shares saw a modest rebound on Thursday, increasing by 1.41% to Rs 75.45, after experiencing losses over the past two consecutive trading sessions. Despite this small recovery, the stock remains volatile, and concerns over unresolved consumer complaints continue to weigh heavily on its outlook. The stock briefly surpassed its IPO price of Rs 76, but it remains significantly below its previous highs, with the shares down more than 52% from their all-time peak of Rs 157.53. 

This recent increase in Ola Electric's stock price is likely due to a few positive developments. Notably, the company was included in the MSCI Small Cap Index, which could drive increased liquidity and trading volume. This inclusion typically signals a greater degree of institutional interest, which might help stabilize the stock. Additionally, Ola Electric is preparing to announce its Q2FY25 results, with many investors watching closely to gauge the company’s financial performance and future trajectory. The potential for positive news could have helped sway investor sentiment, causing a slight uptick in the stock price.

However, the stock's recent history suggests a level of uncertainty. Just a few days ago, Ola Electric shares plummeted more than 8%, falling below their IPO price for the first time since the expiration of the lock-in period. The stock hit a fresh low of Rs 73.70, signaling investor concerns regarding both its financial performance and the ongoing challenges it faces as a business. Despite these dips, the recent gain represents a slight glimmer of hope, though the volatility remains evident.

Although Ola Electric has made substantial strides in gaining market share within the electric vehicle (EV) sector, its ability to achieve profitability and reach breakeven remains a crucial focus for investors and analysts alike. There are still concerns regarding the company's business model, including its high cash burn rate and delays in scaling up production to meet growing demand. Along with these financial concerns, Ola Electric has faced significant scrutiny over service-related issues, including customer complaints related to its vehicles' performance and quality. This has led to increased oversight from the government, with the Central Consumer Protection Authority (CCPA) issuing a showcause notice to the company. The notice compounds the negative sentiment surrounding the company and adds another layer of regulatory risk.

Market experts continue to provide cautious advice on the stock. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, noted that the stock could remain weak in the medium term, although it might still appeal to investors with a higher risk tolerance who are willing to ride out potential volatility. Bathini suggested that investors looking to enter should wait for a further decline in the stock price before considering a buy, especially if they plan to hold the stock for the long term. He advised patience, as the company's future profitability hinges on its ability to resolve operational challenges and ramp up its EV sales.

From a technical analysis perspective, analysts suggest that Ola Electric remains in a precarious position. The stock's performance has been weak, and some analysts predict further declines toward Rs 70. Ravi Singh, Senior Vice President at Religare Broking, described the stock as being in a "no-trade" zone, suggesting that investors should refrain from engaging with it until a clearer trend emerges. Meanwhile, AR Ramachandran, a SEBI-registered research analyst, suggested that the stock is currently oversold and could find some support at around Rs 59.4. However, Ramachandran advised that investors should only consider buying Ola Electric if it shows a consistent upward movement, particularly if it closes above Rs 80.3, which would signal a potential target price of Rs 100.

Ola Electric, founded in 2017, is an electric vehicle manufacturer that produces not only EVs but also essential components such as battery packs and motors at its Ola Futurefactory. The company’s long-term goals include expanding its market share within the growing global EV industry, which has been driven by increasing demand for clean and sustainable transportation options. However, while Ola Electric has garnered attention for its innovative approach to the EV market, the company has faced its share of hurdles, from regulatory scrutiny to challenges in achieving profitability. 

As of September 2024, the promoters hold a 36.78% stake in the company, reflecting a strong level of ownership and commitment to the company’s future. While the long-term potential of the EV sector remains bright, Ola Electric's path to success will depend on its ability to resolve its operational issues, scale production effectively, and navigate the complex regulatory landscape in India and other markets. Until those challenges are addressed, however, investor caution is likely to prevail, with many investors keeping a close watch on the company's earnings report and broader developments in the EV industry. Despite the ongoing uncertainty, the electric vehicle market's rapid growth presents a substantial opportunity for companies like Ola Electric, provided they can navigate their current struggles and execute their strategies effectively.