The electrification of the auto industry is unstoppable. As the alternative energy market ramps up steadily, with climate change an increasingly pressing catalyst worldwide, electric vehicle (EV) production and infrastructure manufacturing companies are riding the sector’s tailwinds amid favorable government policies. Along with this, more people are shifting to EVs, attracted by their improving cost-efficiency, battery life, and performance.
Consequently, several EV start-ups have emerged, particularly through special-purpose acquisitions, leading to potential overcrowding in the EV space. This can make it difficult to pick the stocks that will emerge as the ultimate winners.
The EV industry has been one of the fastest-growing segments in 2020 and is expected to grow at a CAGR of 21.1% over the next six years. The skyrocketing performance of EV stocks is evidenced by KraneShares Electric Vehicle and Future Mobility ETF’s (KARS) 67% gains year-to-date versus the S&P 500’s 15.6% returns in the same period. Moreover, EV momentum is likely to continue because of President-elect Joe Biden’s ambitious plans around achieving net-zero carbon emissions by 2050.
Despite these positive factors and favorable trends, investors should be judicious in picking the best stocks. We believe it could be a good idea to add Blink Charging Co. (BLNK) and Beam Global (BEEM) to your portfolio to significantly benefit from their high growth rates. But, we think it is wise to avoid weaker players like Nikola Corp. (NKLA) and AYRO Inc. (AYRO) for now because these companies have relatively poor prospects and we believe are susceptible to pullbacks.
Stocks to Buy:
Blink Charging Co. (BLNK)
BLNK owns, operates, and provides EV charging equipment and networked EV charging services. It also provides Blink Network, a cloud-based system that operates, maintains, and tracks various charging stations and associated charging data, as well enable the remote monitoring and management of stations and payment processing. BLNK offers more than 23,000 EV charging stations in the United States and worldwide.
Yesterday, BLNK entered a reseller agreement with The Lion Electric Company, a leading manufacturer of zero-emission buses and trucks. Under the agreement, the company will offer BLNK’s full line of charging stations to school systems and bus fleets. Moreover, BLNK announced a seven-year agreement this month with Lehigh Valley Health Network, a healthcare network major, to own and operate charging stations across the health network’s extensive portfolio of locations, and further expand its operations to meet increasing consumer demand.
In the third quarter ended September 30, 020, BLNK’s revenue surged 18% year-over-year to $0.90 million, driven primarily by EV charging installations across states. The company’s product sales have grown 74% from the year-ago value to $0.6 million due to increased demand for the company’s commercial and residential products. BLNK deployed, sold, or acquired 668 EV charging stations across 25 states during the quarter, growing 87% year-over-year. However, the company reported a loss of $0.12 per share, compared to the year-ago loss of $0.10 per share.
The accelerating adoption of EV represents an enormous opportunity for EV infrastructure providers, and BLNK is aims to offer fast, convenient, and reliable charging options. The company is systematically expanding its footprint and growing its brand recognition by capturing premium locations and establishing strategic partnerships. Hence, analysts are confident that as EV adoption grows, the utilization of chargers will increase. Furthermore, they expect BLNK’s revenue and EPS to rise 89.4% and 15.2%, respectively, next year.
BLNK has gained more than 2,070% year-to-date to close yesterday’s trading session at $40.40. The stock is up 44.3% in the past month and is currently trading at a 28% discount from its all-time high of $56.12.
Under our POWR Ratings, BLNK has an Overall “Buy” rating. It also has an “A” rating for Trade Grade and Peer Grade. Of37 stocks in the Specialty Retailers industry, BLNK is rated #13.
Beam Global (BEEM)
BEEM invents, designs, engineers, manufactures, and sells solar-powered products and proprietary technology solutions in the U.S. and internationally. It offers solar powered products and proprietary technology solutions for electric vehicle charging infrastructure, out of home advertising platforms, and energy security and disaster preparedness.
The City of Montebello has recently deployed two of BEEM’s global EV ARC solar EV charging terminals to serve city fleet vehicles. The company has also received a patent from the U.S. Patent and Trademarks Office covering the UAV ARC Drone Recharging Network, Beam’s renewable energy, networked drone recharging solution, which provides en route charging for unmanned aerial vehicles. Moreover, BEEM has entered an underwriting agreement with Maxim Group LLC to offer 250,000 shares of the company’s common stock worth $7.5 million.
In the third quarter ended September 30, 2020, BEEM’s revenue declined 30.7% year-over-year to $1.24 million due to delays in the receipt of orders and the early-stage delivery challenges of its latest generation of Solar Tree products, which provide charging equipment for electric buses and heavy-duty vehicles t. However, the company reported a loss of $0.17 per share, compared to the year-ago loss of $0.15 per share.
According to company management, “We are well funded, essentially debt free and we have laid the foundation for our Outdoor Media Business Unit, which I believe will be the biggest and most profitable growth engine for our future.”
BEEM recently announced patents pending on three new product developments aimed at renewably energized EV charging infrastructure. In line with the outlook, analysts expect EPS to rise 35.3% in the current year and 18.2% next year.
BEEM closed yesterday’s trading session at $68.14, gaining 873.4% year-to-date. Moreover, the stock has gained more than 90% in the past month. BEEM hit its 52-week high of $68.69 on Monday but is currently trading just 0.8% below it.
It is no surprise that BEEM is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade and Peer Grade. Among Solar stocks, it is ranked #4 out of 19.
Stocks to Avoid:
Nikola Corp. (NKLA)
NKLA operates as an integrated, zero-emissions transportation systems provider. It designs and manufactures battery-electric and hydrogen-electric vehicles, drivetrains, energy storage systems, and hydrogen fueling station infrastructure. NKLA has been all over the news this year, with investors accusing the company of being “an intricate fraud built on lies” based on alleged false statements by its founder, Trevor Milton.
Milton stepped down following a scathing report by short-selling firm Hindenburg Research that accused him of fraud, and the company later admitted producing a fake video of its electric hydrogen truck driving prototype. NKLA is reportedly being investigated by the Department of Justice and the SEC and is currently being sued by The Schall Law firm.
NKLA recently formed a strategic partnership with General Motors (GM) for to supply of batteries and fuel cells. But the company has given up a portion of the stake (originally 11%) and has dropped plans to build the Badger, NKLA’s pickup truck for consumers.
NKLA has not yet produced any products and does not possess a manufacturing plant. In the third quarter, the company reported a loss of $0.31 per share compared to its year-ago loss of $0.06 per share. The company plans to begin trial production by the third quarter of 2021 in the Coolidge manufacturing facility in Arizona and anticipates commencing the production of its Nikola Tre in the fourth quarter of 2021. However, analysts expect EPS to decline 20.3% next year.
NKLA has lost nearly 42.3% in the past three months to close yesterday’s trading session at $16.13. The company went public in June 2020, and the lock-up period restricting insiders from selling shares expired on November 30. The stock has been experiencing heavy selling pressure since. Moreover, NKLA is planning to sell more shares in the open market, which will further dilute its shareholdings.
NKLA’s poor prospects are also apparent in its POWR Ratings, which give it a “Sell” rating. It also has a “F” for Trade Grade and Buy & Hold Grade, and “D” for Peer Grade. It is ranked #28 of 35 stocks in the Auto & Vehicle Manufacturers industry.
AYRO Inc. (AYRO)
Texas-based AYRO designs and manufactures purpose-built, light-duty, emissions-free electric vehicles for urban and community transport, local delivery, closed campus mobility, recreational, and government use. It offers AYRO 311, a three-wheeled vehicle for professional and personal use; Club Car 411 for low-speed logistics and cargo services for campus; and AYRO 511 4×4 concepts.
AYRO recently received a strategic investment of $10 million from Carnegie Hudson Resources, an investment arm of Wanxiang America, along with several institutional investors. Wanxiang America is a subsidiary of Wanxiang Group, a Chinese conglomerate and owner of Karma Automotive and A123 Systems, a developer of EV batteries and supplier to automotive manufacturers worldwide. The Karma Automotive Innovation and Customization Center (KICC) also signed a strategic manufacturing, engineering, and design partnership with AYRO in September.
In the third quarter ended September 30, 2020, AYRO generated $388,654 in revenues, representing an increase of 46.4% year-over-year. The company announced $584,000 in orders for its mobile food truck following its partnership announcement with Gallery Carts. It also delivered 411 cars to Club Car during the quarter via its exclusive relationship with them and deployed an initial order for nine Club Car 411 EVs. AYRO also completed an expansion of its Austin manufacturing facility to 24,000 square feet to increase production capacity from 200 electric vehicles per month to 600 per month. Moreover, AYRO reported a loss of $0.13 per share, improving from the year-ago loss of $0.77 per share.
AYRO has not reached the mass-production stage but aims to deliver more than 20,000 light-duty trucks and electric delivery vehicles over the next three years; it estimates this production goal to have a value more than $300 million, which is ambitious. In addition, the company does not own the design of the 411 model and may lose the exclusive reselling rights for it the company fails to achieve the unit sales targets. AYRO is still lacking the design for its 511-concept.
AYRO closed yesterday’s trading session at $6.37 and is still 44.8% up year-to-date. However, the stock has lost 24% in the past month and has retreated 40% from its 52-week high of $10.60.
AYRO’s POWR Ratings are consistent, with this bleak outlook. It has been accorded a “D” for Buy & Hold Grade and Peer Grade, and a “C” for Trade Grade. It is ranked #27 of 35 stocks in the Auto & Vehicle Manufacturers industry.
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NKLA shares were trading at $16.09 per share on Wednesday afternoon, down $0.04 (-0.25%). Year-to-date, NKLA has gained 55.91%, versus a 17.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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