These urban mobility stocks could be set for a significant rally

 By Tyrik Torres

  • These three urban mobility stocks are worth considering.
  • EHang (EH): The EH216-S AAV fully autonomous drone has received aviation approval.
  • Ambarella (AMBA): Now may be an opportune buying time, as the macro environment will likely improve next year.
  • China Railway Construction Corporation (CRCCY): The Jakarta-Bandung high-speed railway is operational with positive results.

The equities markets have shown remarkable resilience since both market indices, the S&P 500 and Nasdaq, entered correction territory in October. However, the latest economic data has boosted investor sentiment: the October CPI report and other labor market indicators, including payroll data, came in cooler than expected, easing the fears of runaway inflation and signaling the Fed may indeed be done with its tightening cycle. That may create a favorable environment for investors to look for growth opportunities in emerging sectors, such as urban mobility.

Urban mobility refers to the technologies and services that enable people to move around cities efficiently, safely and sustainably. These include autonomous vehicles, drones, electric bikes and scooters, ride-hailing platforms and smart infrastructure. Urban mobility stocks are attractive for investors because they have the potential to disrupt the transportation industry, reduce carbon emissions and improve the quality of life for millions of urban dwellers.

EHang (EH)

China-based EHang (NASDAQ:EH) designs and manufactures autonomous aerial vehicles (AAVs) for applications such as tourism, logistics and emergency response. Unlike many flying vehicle companies, EHang has successfully delivered products and generated sales, generally due to there being consistent, domestic demand for its products in China. As of its latest fiscal quarter, EHang delivered 8 AAVs, with more than 100 deliveries in its pipeline.

While EHang does generate sales, year-over-year (YoY) revenue growth figures have been inconsistent in the first half of 2023. In the first quarter, revenue increased 283% YoY, primarily due to the pandemic-related reopening in cities across China, which spurred demand for EHang’s various products. After the initial pent-up demand, second-quarter sales growth, unfortunately, declined significantly from a YoY perspective.

However, the aerial vehicle company could soon experience strong growth. China’s Civil Aviation Administration recently gave airworthiness approval to EHang’s fully autonomous drone, the EH216-S AAV, which carries two passengers. As more Chinese cities open up to autonomous flying vehicle technology, EHang’s revenues and stock price could catapult to new heights in future quarters.

Ambarella (AMBA)

Ambarella (NASDAQ:AMBA) is the other urban mobility stock worth considering. What differentiates this company from the others is that Ambarella is a U.S.-based fabless semiconductor design company that produces high-performance video processing chips for various applications instead of directly designing or manufacturing infrastructure. These include security cameras, dashcams, drones and autonomous vehicles. In particular, Ambarella’s chips enable high-quality video capture, compression, analysis and transmission, which are essential for developing smart mobility solutions.

While Ambarella’s solutions are sure to play a hand in urban mobility innovation, the demand for these solutions under the current macroeconomic environment has remained soft throughout 2023. For the first half of 2023, revenue declined YoY. Ambarella’s shares have thus fallen 30% year-to-date (YTD). But as demand returns to normal levels in the coming quarters, investors might find now to be an opportune moment to buy shares.

China Railway Construction Corporation (CRCCY)

China Railway Construction Corporation (OTCPK:CRCCY) is one of the largest construction companies in China and the world. Consequently, CRCCY has been instrumental in various projects related to infrastructure construction vital to economic development, including railways, highways, bridges, tunnels, urban rail transit, water conservancy, airports, ports and buildings. All of these projects are vital to urban infrastructure in the developing world.

To continue stimulating China’s economy, the government approved a CNY 1 trillion ($137 billion) infrastructure spending package, which could help CRCC generate revenue while the economy continues to recover. Internationally, CRCC has secured several large-scale contracts in overseas markets, such as the high-speed railway (HSR) project in Indonesia and a light rail project in Saudi Arabia. The former, which involves the Jakarta-Bandung HSR project was already completed and is in operation with positive press and reactions from the public thus far.

Investors willing to bet on a stock with strong fundamentals, a cheap valuation and obvious tailwinds guiding growth should definitely give CRCCY an honest consideration.