Kandi Technologies (KNDI) Reports Mediocre Results, Future Still Bright

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11:09:38 pm on November 14, 2011

Kandi Technologies (KNDI) reported earnings results after the bell tonight that were just OK.  This is one of many “green” companies where traders are currently making bets on the potential rather than current earnings and sales.  If you believe that China will be as ambitious with its electric car initiatives as it has been with solar, then a trade in KNDI down here probably makes sense for the long haul.  Just a couple months ago I highlighted a key technical breakout in the stock indicating the bottom was likely in.  It took some time for the stock to resume the breakout, but that is currently happening as the stock continues to clear key resistance levels. 

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The company reported a non GAAP EPS close to .03/share on revenues of $10.3 million which was slightly below the year ago quarter.  Yes growth has been stagnant as the company continues to build infrastructure and patience will be needed for this stock, but the payoff could be significant. 

Mr. Xiaoming Hu, Chairman and Chief Executive Officer of Kandi Technologies, commented, "Despite the decreased sales in some key products, we think we have made great progress in improving our cost management and market expansion. Compared to the same period last year, we achieved modest growth in our EV sales. Since the end of the quarter, on October 12, 2011, the government subsidies for 3,000 Kandi Pure Energy Vehicles were successfully initiated in Jinhua City, in Zhejiang Province, and sales have been very positive. In addition, Kandi Pure Energy Vehicles will soon begin to be sold in Hangzhou City where the government goal is the sale of 20,000 vehicles. We will continue to work closely with the regional government, and effectively expand the sales distribution and network of our EVs in order to further penetrate existing markets. Additionally, we anticipate Kandi Pure Energy Vehicles will be introduced to many mid-large cities throughout China in the near future, which will provide us a strong base for future EV sales in China."

Outlook "We are confident about the future growth of our EVs and becoming the leader in this market, and that we will be able to meet both domestic and international growing demand for our variety of products," Mr. Hu stated. "In this regard," he added, "we remain optimistic about the growth of our all-terrain vehicles (ATVs) in China. While our existing business and operations remain strong, we will continue to improve our manufacturing capabilities, promote strong alliances, expand capacity, strengthen and accelerate product development, and enhance our management capability in order to realize future fast growth and reach a higher performance level," concluded Mr. Hu.

Technically, as mentioned above, the stock is looking increasingly bullish and it appears a longer term bottom is in place.   The stock has cleared resistance of both the 50 and 200 day moving averages in the past couple weeks and is currently digesting those gains with new support around the 200 day moving average.  I like the stock in the $2.50 – $2.70 range for a trade. 

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