10 Worst Chinese Stocks to Buy Right Now According to Short Sellers

6) EHang Holdings Limited (NASDAQ:EH)

Short % of Float (8/30/2024): 12.36%

Number of Hedge Fund Holders: 7

EHang Holdings Limited (NASDAQ:EH), with its subsidiaries, is engaged in developing and marketing an autonomous aerial vehicle (AAV) technology platform. The company delivers proprietary passenger-carrying AAVs, related command-and-control systems, and commercial solutions.

The company released its results for 2Q 2024, in which it missed its earnings per share (EPS) analyst estimates by 29%. EHang Holdings Limited (NASDAQ:EH)’s basic and diluted net loss per ordinary share came in at RMB0.54 (US$0.07). Short sellers believe that the company’s increased operating expenses might continue to impact its bottom line and margins. In 2Q 2024, its total operating expenses came in at RMB143.3 million (US$19.7 million) as compared to RMB82.0 million in 2Q 2023.

Also, late last year, a renowned short-seller alleged that EHang Holdings Limited (NASDAQ:EH) has a major credibility issue-whether it be a false representation of its massive 1,300+ unit preorder book or misleading early sales, pointing to fake revenue. The short seller mentioned that, with its consistent underinvestment in R&D, the company needs to rework its entire design to satisfy safety needs for the use cases.

On the other hand, Wall Street analysts believe that EHang Holdings Limited (NASDAQ:EH) achieved positive milestones, which include product listing and government approval in China. The company’s long-term growth outlook stems from increased government support, consumer willingness to pay, and management of financial difficulties. EHang Holdings Limited (NASDAQ:EH) has started selling the EH216-S model flying taxi on Taobao for the consideration of 2.39 million yuan ($332,060).

Market experts believe that EHang Holdings Limited (NASDAQ:EH) should be supported by sectoral tailwinds, such as the trend of the low-altitude transport economy. The company’s competitive advantages include its leading position regarding government support and technology advancement. The company continues to leverage the manufacturing value chain in China, which should help it in expanding its manufacturing line to scale up.

UBS Group assumed coverage on the shares of EHang Holdings Limited (NASDAQ:EH) on 28^th August. They gave a “Buy” rating, with a price target of $22.00. At the end of 2Q 2024, 7 hedge funds held stakes in the company, as per Insider Monkey’s database. Deep Sail Capital, an investment management company, released its third quarter 2023 investor letter. Here is what the fund said:

“Our worst-performing short position was EHang Holdings Limited (NASDAQ:EH), which saw significant upside from EVtol excitement and exhibited squeeze dynamics in the quarter. We seek to avoid these types of squeezes and are attempting to be nimbler in our short positioning at these levels.”