On Thursday, Citi updated its stance on Gogoro Inc. (NASDAQ:GGR), reducing the price target to $2.30 from $2.70, while maintaining a Buy rating on the stock. This adjustment follows Gogoro's second-quarter earnings report for 2024, which revealed a 7% year-over-year decline in revenue to $81 million, and a net loss that expanded to $20 million.
The previous year's same quarter reported a net loss of $6 million, and the first quarter of 2024 saw a net loss of $13 million.
The shortfall in Gogoro's performance is attributed to several factors. The company experienced a decrease in the average selling price (ASP) and margins, which was partly due to the introduction of JEGO, a new product with a lower ASP.
Additionally, the revenue did not benefit from the Indian market as anticipated because the Indian government delayed the inclusion of battery-swapping electric two-wheelers (E2Ws) in the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. Gogoro also incurred costs related to a new battery upgrade initiative.
These challenges are expected to continue into the second half of 2024, prompting Gogoro's management to revise its full-year 2024 revenue guidance downward to $320-340 million, a decrease from the previously projected range of $385-420 million.
In response to these developments, Citi has also adjusted its net profit estimates for Gogoro for the years 2024, 2025, and 2026 to negative $80 million, negative $76 million, and negative $45 million, respectively. These figures represent a significant change from the initial estimates of negative $68 million, negative $26 million, and a positive $1 million.
The revised price target of $2.30 is based on a sum-of-the-parts and price-to-sales methodology, which Citi has stated remains unchanged despite the updated figures.
InvestingPro Insights
InvestingPro data highlights key financial metrics for Gogoro Inc. (NASDAQ:GGR), which may be of interest to investors following Citi's recent price target update. The company's market capitalization stands at $347.72 million, and it operates with a negative P/E ratio of -6.02, indicating that it is not currently profitable. Additionally, the latest data shows a revenue decline of 7.47% over the last twelve months as of Q1 2024, emphasizing the challenges Gogoro faces.
From the perspective of InvestingPro Tips, two critical points stand out. Firstly, Gogoro operates with a significant debt burden, which may contribute to its difficulty in making interest payments on debt. This is particularly concerning given that analysts do not anticipate the company will be profitable this year. Secondly, the stock has experienced a notable decline, with a 50% drop in year-to-date price total return, reflecting market sentiment towards the company's performance and future outlook.
For investors seeking a deeper analysis, InvestingPro offers additional insights, with a total of 13 tips available on their platform. These tips could provide a more nuanced view of Gogoro's financial health and stock performance, aiding in investment decisions. The InvestingPro Fair Value estimate is currently set at $1.15, which is notably lower than Citi's revised price target, suggesting that investors should approach the stock with caution.
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