Investidea: AppHarvest, because the harvest is ripe

Investidea: AppHarvest, because the harvest is ripe

Today we have an insanely speculative idea: take shares of agricultural startup AppHarvest (NASDAQ: APPH), to cash in on their rebound.

Growth potential and validity: 37,5% behind 2 of the year; 292% behind 7 years; 587,5% behind 20 years.

Why stocks can go up: they fell hard, but their speculative rebound is possible.

How do we act: we take shares now by 5,15 $.

When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.

No guarantees

Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.

And what is there with the author's forecasts

Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.

So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

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What the company makes money on

It is a network of ecological farms, where vegetables and fruits are grown using artificial intelligence, machine learning and robots. A detailed analysis of the company's work can be found in the review., so we won't repeat ourselves here..

The company's business has not yet left the startup stage: total revenue in 2021 is $5.9 million. The company is wildly unprofitable.: its loss for the same period amounted to 77.799 million.

All in all, startup as it is.

Arguments in favor of the company

Fell down. The company's shares have fallen sharply this year from a historic peak. 35,7 $ in February to 5,09 $. Now they are almost two times cheaper than the price of accommodation — 10 $. Think, we are given a good opportunity to take stocks with the expectation of a rebound.

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Price. In absolute numbers, the company is worth very little.: its capitalization is 512.55 million dollars. This will make AppHarvest shares quite mobile due to the influence of the factors described below.

«Cloning, occultism, black magic". I think, that retail investors will generally fall for the words about AI, robots and other "brave new world" and pump up the company's shares, because "this is the future of agriculture". But besides them, the company's quotes may well be supported by serious institutional investors, interested in transforming the US agricultural economy.

The American agricultural sector was, is and, if nothing changes, will depend on a pool of cheap labor from illegal migrants, which are from 50 to 75% all employees on American farms. It's about the illegals., who can only work in the lowest-skilled, lowest-paid jobs available in the United States, where government oversight is not so strong, as in other areas. Illegal immigrants were not expelled from agriculture even during the period of coronavirus restrictions, declaring them critical workers.

But the eternal pandemic still imposes serious restrictions on the movement of a large number of people.. And without a pandemic, count on it, that Latin America will forever supply the US labor market with a sufficient number of people willing to work for a pittance, desperate poor, not worth it either. Therefore, the robotization of agriculture in America began under Trump. This area lends itself to robotization with great difficulty., since investments in this area will not begin to pay for themselves soon.

About the same, By the way, it was with electric cars. For money to go into the technological transformation of agriculture, we need to support startups, working in this area, - how large investors supported Tesla, to motivate the large auto industry to invest in the electrification of vehicles.

So there is reason to calculate, that AppHarvest quotes will pump up despite the lack of a solid economic foundation for this company - just to create the image of a “profitable” enterprise for robotic agriculture and facilitate the flow of money to similar companies.

Can buy. The low price and the desire to experiment with robotization may well lead some large agricultural holding to the idea of ​​​​acquiring AppHarvest. This is facilitated by high food prices.: i would expect, that agricultural holdings will decide to invest part of their excess profits in technological experiments, to strengthen your business in the face of risk, associated with a potential reduction in the availability of illegal workers.

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What can get in the way

The economic foundation is weak. Agriculture is very difficult to robotize, largely due to the volatility of prices for products in this sector.. Cheap labor for agriculture is one way to balance the risks of falling product prices. AppHarvest's default way of doing things is less profitable, than conventional farms.

So there is nothing surprising in, that the company does not even fit into its own revenue plans. But investors do not make allowances for the specifics of agriculture, and they react very painfully to this news.. Worse than that: here you should not expect a rapid growth in AppHarvest's financial performance. All factors in favor of these stocks are purely speculative..

Does not contribute to the growth of quotations and unprofitability of the company: next year FED raises the stakes, which will greatly complicate the company to obtain a loan. Considering this, she will be motivated to deal with the additional issue of shares, what quotes can suffer from, if there is not enough demand for its shares.

So AppHarvest stocks will storm - you need to be ready for this. In general, the company looks like a crude startup - so it may well go bankrupt in six months.

Red Notice. AppHarvest went public by merging with SPAC. SPAC often hides a lot of unpleasant things, so there are risks with AppHarvest, that everything will end with the delisting and closing of the company. Moreover, it is already known about the claims of investors, shareholder fraud: the company cut its revenue expectations too much, which raises doubts about the honesty of its leaders, which could alert future shareholders to such risks.

Maybe, In the future, investors are waiting for other unpleasant revelations, that can drag quotes to hell.

What's the bottom line?

We take shares now by 5,15 $. And then there are several options.:

  1. I think, over the next 2 year we can wait for the growth of the value of shares to 7 $, who asked for them back in September 2021;
  2. You can hold the following shares 7 years, to wait for the price 20 $;
  3. you can finally get naked and hold the following stocks 20 years, to see, how they will return to the historical maximum 35 $.
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But it must be understood, that this idea is wildly volatile and speculative - like all ideas of investing in startups. All factors in favor of AppHarvest shares are purely speculative, there is no economic basis for this idea: the company is not yet a more or less working business. This is an experiment in the form of a publicly traded company.

Therefore, treat this idea accordingly and invest in these stocks only that money, which would otherwise be burned in the furnace.

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