The ‘green’ economy is here, a fact of life that will affect a wide range of activities and force adjustments that are almost unpredictable at the moment. From power generation to expanding the recycling industry to electrification of transportation – these are just some of the sectors that will go greener in the coming decades.
So let’s talk about transportation. Let’s talk specifically about electric vehicles, a segment that is attracting a lot of interest from, well, everyone, with what seems to acknowledge that this is where the future of transportation lies.
For example, the US Postal Service has signed a 10-year, multi-billion dollar contract to manufacture a fleet of electric vans; Ford Motor Company, which has pledged $11 billion in recent years to develop electric vehicles (EVs), has doubled that to $22 billion and plans to develop electric versions of the ever-popular Mustang muscle car and F-150 pickup truck. to introduce; GM has announced it will stop producing gasoline cars by 2035.
But it’s not just the old automakers that will benefit from a shift—however intense—to EVs. Smaller companies are popping up to fill niches in the overall EV market, while some legacy supply chain names are changing their public face and focusing on electrical applications. We have used the TipRanks platform to look up some of these companies and get in touch with Wall Street’s analysts to get a sense of Street’s sentiment on the EV sector. Let’s take a closer look at that.
GreenPower engine (GP)
We start with commercial vehicles, a segment that lends itself in many ways to electrification. Light buses and trucks, used over short distances within urban areas and easily accessible from charging stations, are a logical starting point for municipal transport authorities. GreenPower Motor is capitalizing on this niche, building a line of buses that it markets for transportation systems and school districts, and small to medium utility vans. The company also produces, as its main product, a cab and chassis for medium trucks, the EV Star, which can be adapted with a variety of trailers and vans.
In recent months, GreenPower has benefited from political pressure to expand the use of electric vehicles. The trend is especially strong on the US West Coast, in part because of the Democratic Party rise in the region, and the company’s customers include the Port of Oakland, the University of California system, and Sacramento Regional Transit. The state of California has mandated that all new vehicles sold in the state must be electric by 2035 — mind you, it’s the same target date GM announced — giving GreenPower, which is based in Vancouver, British Columbia, a long-term path to potential regional customers.
However, GreenPower is not just waiting for CA. In May, the company announced it had completed delivery of 5 EV Star cab-and-chassis vehicles to Berkshire Hathaway company Forest River, a maker of RVs and recreational vehicles. And earlier this month, GreenPower added WeDriveU, an electric transportation company specializing in shuttle buses, to its customer list. WeDriveU is partnering with GreenPower to purchase EV Star shuttle vans for its transportation fleet.
In its financial release for the fourth quarter of fiscal year 2021 ended March 31, GreenPower reported a 76% year-over-year revenue increase from $2.49 million to $4.38 million. During the quarter, the company delivered 5 all-electric EV250 30-foot buses to LAX airport, where they will be used for shuttle operations, and sold 30 EV Star vehicles to Zeem Solutions. The company also increased production of the BEAST line of all-electric school buses and increased total inventory from $6.6 million in the year-ago quarter to $12.5 million.
B. Riley Analyst Christopher Souther writes of GreenPower’s potentially bright future: “We expect GP to benefit in the coming months and years from the growing number of EV programs and mandates in the federal, commercial and other spaces. At the federal level, the Biden administration’s proposed infrastructure plan includes a Clean Buses for Kids program, which would replace 50,000 diesel transportation vehicles and electrify at least 20% of the country’s yellow school bus fleet. Currently, about 95% of public school buses in the US run on diesel. On the commercial side, companies with significant fleets continue to study EV deployment, and more deals such as GP’s agreement with Forest River remain potential game-changers for the company.”
Souther’s price target of $34 suggests a robust one-year gain of 195% and supports his buy recommendation for the stock. (To view Souther’s track record, click here.)
In the past 3 months, this stock has received only two ratings from Wall Street analysts – but they are both positive, resulting in a consensus rating for a moderate buy. The average price target is $39.50, which leaves room for impressive growth potential of 127% over one year. (Check out GreenPower’s stock analysis on TipRanks.)
From commercial EVs, we’re switching and looking at the personal car market. This is a more difficult reach for companies, especially smaller start-ups that are jumping into the market to the fullest. Fisker is busy designing and taking pre-orders on the Ocean, its custom all-electric SUV with a solar panel roof. Production of the Ocean is scheduled for 4Q22.
This company is new to the public markets, having entered the NYSE in October through a SPAC merger. Shares gained significantly after the merger transaction was completed and peaked in early March. However, the company suffered a setback at the time when it dropped its much-hyped solid-state battery program. The technology was intended to replace current lithium-ion batteries with a new energy storage unit of significantly smaller size and better performance. However, the company had to admit that developing solid-state batteries for automotive use is impractical at the moment.
Despite the battery slump, Fisker has reported recent progress with the Ocean program. Development of the production facility in Graz, Austria, is on track and the company expects to start production of prototypes soon, with a capacity of 1,500 vehicles per year. At the end of June, the company reported more than 17,000 pre-orders for the Ocean vehicle. With 50% of those orders coming from outside the SUV segment, the company is seeing a wider audience than initially anticipated.
Because no product line is in production yet, Fisker’s quarterly reports are more useful as updates on the company’s progress in creating and meeting customer demand. The most recent report, for the first quarter, showed Fisker remains well-funded, with $985 million in cash on hand.
In its initiation report for RBC Capital, analyst Joseph Spak believes the company represents a “convincing risk/return”. He writes, “Fisker plans to bring BEVs to market in a differentiated manner, leveraging third-party BEV platforms and contract manufacturing. This leverages the billions of dollars the industry is pouring into the market. believes that the underpinnings of a BEV are even less differentiated than that of ICE vehicles, so by saving capital when building out a platform and manufacturing facility, Fisker can use capital and resources to differentiate the customer experience (design, software, UX and ownership). The easiest analogy is with Apple, which designs its products, but lets contract manufacturers assemble/produce. The model will not be without its challenges, but if it is successful, we see room for an asset-light, lean cost structure entity .”
Spak describes this stock as a speculative risk, but he is bullish in the long run, giving FSR an Outperform (ie a buy) rating along with a price target of $27, indicating the possibility of a 63% gain over one year. . (To view Spak’s track record, click here.)
Wall Street has different opinions on this stock, but the bulls are in control; FSR stocks have an average buying consensus, based on 8 ratings that break down into 5 buys, 2 held and 1 sell. The stock’s average target of $24.49 suggests a 47% increase for the coming year. (Check out Fisker’s stock analysis on TipRanks.)
Aptiv PLC (APTV)
Of the stocks on this list, Aptiv is the most ‘established’ name. The company has its roots in Delphi, a big name in Detroit and part of the automotive supply chain companies that call the Motor City home. Delphi has spun off its powertrain segments and rebranded the remaining branch as Aptiv. Aptiv is now working on high-tech for high-end automotive applications. The company develops a range of technical platforms, including computers, networks and software, designed to improve vehicle efficiency and safety.
Aptiv’s product portfolio includes active sensing systems to improve vehicle safety, computer systems and satellite architectures that enable connected vehicles, and electrical distribution systems to enable robust high voltage connections. The company sees great potential in these directions and estimates that the market for active safety systems will reach $17 billion by 2025 and $14 billion for electrification that same year.
In the first quarter of this year, Aptiv posted revenue of $4 billion. Although lower than the fourth quarter, it was an increase of almost 24% year-over-year and better than consensus estimates. Earnings per share came in at $1.03, also ahead of Street’s forecast at $0.37. Aptiv generated more than $252 million in cash operations during the first quarter and closed the quarter with $5.4 billion in available cash.
Looking ahead to the second quarter, five-star Guggenheim analyst Ali Faghric writes, “[We] believe the 2Q consensus yields based on our analysis appear ~$100 million light assuming no outgrowth on a sequential basis and neutral mix. Lowering the income statement, we also believe that consensus decline margins of 23% on a sequential basis appear overly conservative, given management’s comments at recent industry conferences that headwinds are modest and manageable. When we put all of this together, we expect second quarter revenue and earnings per share growth versus consensus.”
Faghri’s bullishness is evident in his rating on the stock; he has upgraded his stance from neutral to buy, and his price target of $184 implies an 18% increase over the next 12 months. (To view Faghri’s record, click here.)
Analyst ratings for this stock include 11 to buy and 2 sell, for an average street buying consensus. Shares are now trading at $153.15, and their average target of $167.08 suggests they have room to grow at a modest 7% this year. (Check out Aptiv’s stock analysis on TipRanks.)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.