Why CBAK Energy Technology Stock Continued Its Rebound on Friday

What happened

Shares of Chinese lithium rechargeable battery maker CBAK Energy Technology (NASDAQ:CBAT) were on the rise again Friday, up by as much as 17.7% in early trading, and holding onto an 8.2% gain as of 12:08 p.m. EST. It was the stock’s second consecutive day of big gains after two straight days of even bigger losses.

So what

There doesn’t appear to be any “news” driving shares higher Friday — no analyst upgrades, no excited press releases from management. Rather, it appears traders are taking advantage of CBAK Energy’s now-lower share price to buy in.

And if you think the company has a future, that price is considerably better than what you would have been asked to pay just a week ago. CBAK Energy stock is trading about 28% below where its shares closed last Friday.

Bouncing basketball with a happy face on it

Image source: Getty Images.

Now what

It’s up for debate, however, whether what you’ll get even at this discounted price is an actual bargain. CBAK Energy hasn’t earned a profit in about five years now, and it’s still burning cash at the rate of about $5 million a year.

That being said, it’s burning less cash than last year, when its burn rate exceeded $23 million. And the prospect that growing demand for electric cars in China might boost demand for CBAK’s batteries cannot be discounted.

Are the traders who are rushing back into CBAK Energy stock perhaps onto something here? I cannot dismiss the possibility entirely, but — share price revival notwithstanding — until I see significant and sustained improvement in the profit and free-cash-flow fronts, I’m going to continue to vote “no” on this one.

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