Why Incoming Stock Jumped 14% Early Today

What happened

Investors in Arrival (NASDAQ: ARVL) had a pleasant surprise on Tuesday morning when shares of the electric vehicle (EV) start-up soared as high as 14.1% at one point in early trading.

Those gains quickly faded, however, as stock markets slipped into negative territory. The stock finish was barely in the green at 11:30 a.m. ET, but it helps to know what sent the penny stock so high.

So what

Arrival released its first quarter earnings report this morning. For a change, the embattled electric vehicle maker had good news to share with investors.

Image source: Getty Images.

Arrival posted a loss of just $10.4 million for the first quarter compared to a loss of nearly $1.1 billion a year ago. This massive turnaround alone sparked interest in the stock, but it seems the market quickly realized it wasn’t a turnaround after all.

Arrival’s huge losses last year were the result of one-time charges related to its reverse merger with a special purpose acquisition company (SPAC) last year through which Arrival went public. Adjusting for these charges, Arrival’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) loss more than doubled year over year to $67 million in the first quarter.

For the full year, Arrival expects to see an adjusted EBITDA loss of $185 million to $225 million.

Now what

For Arrival’s investors right now, the company’s progress in its production and delivery times is far more important than any number. This is because Arrival has yet to manufacture and sell vehicles commercially, and unless the company reaches its first production and delivery milestones and generates its first revenue, investing in stock d’Arrival is only speculation.

From that perspective, Arrival tried to convince investors of its progress by announcing today that it plans to start production of its pickup trucks as well as public road testing for its buses in the third quarter. It plans to produce 400 to 600 pickup trucks this year. This is still well below the number of vehicle companies such as UPS have provisionally on order with arrival.

Incoming stock could increase if the company can hit those milestones, but it’s still a big ifand Arrival will have to do much more much faster to regain investor confidence.

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Neha Chamaria has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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