The shift towards electric vehicles (EVs) is inevitable making this nascent industry an extremely lucrative bet for long-term investors. While there are several companies targeting the business-to-consumer (B2C) EV space, the players in the commercial segment are quietly flying under the radar.
According to a report from Quince Market Insights, the commercial EV market is forecast to touch $62.4 billion in 2021. An expanding addressable market attracts various players and here we take a look at two companies in Lion Electric (LEV) and Blue Bird (BLBD) to see which stock should be part of your growth portfolio today.
While Lion Electric Company is trading at a market cap of $2.4 billion, Blue Bird is valued at a market cap of $564 million.
Lion Electric Company (LEV)
Lion Electric Company manufactures all-electric medium and heavy-duty urban vehicles in North America. Based in Canada, it primarily offers electric-powered buses and trucks.
In the second quarter of 2021, LEV delivered 61 vehicles compared to 22 vehicles in the year-ago period. Its revenue stood at $16.7 million compared to $6.1 million in Q2 of 2020.
However, its gross profit fell from $1 million to $0.9 million in this period. It ended the quarter with an adjusted EBITDA loss of $5.5 million, wider than its year-ago loss of $0.1 million.
At the end of Q2, the company’s cash balance stood at $364.3 million and it added an additional borrowing capacity of around $100 million last month.
LEV has delivered over 400 vehicles to date and its order book stood at 965 vehicles as of Aug. 12 this year. This order book includes expected deliveries for 262 trucks and 703 buses suggesting a combined order value of $280 million.
Analysts tracking LEV stock expect its sales to rise from $83.68 million in 2021 to $343 million in 2022. Its loss per share is also forecast to narrow from $1.33 to $0.24 in this period.
CIBC is optimistic about Lion Electric Company as it enjoys a first-mover advantage in the electric bus vertical and seems well-poised to ramp up to meet rising demand. CIBC has a 12-month average price target of $20 for LEV stock which is 25% above its current trading price.
Blue Bird is relatively cheap (BLBD)
Blue Bird designs, engineers, manufactures, and sells school buses and related parts in North America and other international markets. It has two primary business segments and offers Type C, Type D, and specialty buses as well as alternative fuel applications. The company sells vehicles via a network of dealers as well as fleet operators, in addition to federal and state governments.
In the fiscal third quarter of 2021, Blue Bird reported sales of $196.7 million and a GAAP net income of $4.3 million. The firm’s order backlog is over 4,000 units including an electric bus backlog of close to 400 units. In Q3, Blue Bird sold 2,024 buses while reporting an adjusted EBITDA of $13.2 million.
Blue Bird explained that supply chain disruptions continue to weigh on demand which means the company’s sales are forecast to decline by 16% in 2021. Wall Street expects sales to touch $734 million this fiscal year, compared to over a billion in fiscal 2019. However, its sales are forecast to increase by 20% to $880 million in fiscal 2022.
The key takeaway
I believe BLBD is currently the better investment. LEV is trading at a far higher multiple compared to BLBD. And BLBD is profitable and fast gaining traction in the electric bus segment. Also, I prefer BLBD because of its accelerating revenue and earnings growth.
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LEV shares were trading at $12.64 per share on Monday morning, down $0.45 (-3.44%). Year-to-date, LEV has declined -28.91%, versus a 16.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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