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The automotive sector is in the midst of an enormous change. A combination of social and political forces are pushing the industry more and more toward adoption of electric vehicles (EVs) as a new standard – although the internal combustion engine is not likely to be fully phased out, EVs are certain to find a large niche. ‘Last mile’ delivery, and various fleet businesses are already finding that EVs can meet their needs efficiently.
But the electric car market isn’t just about cars. They may get the headlines, and Tesla may have boomed into a trillion-dollar company, but no EV will go anywhere if it can’t be recharged. And it’s a fact that leads us directly to the EV charging market.
The charging market is no small potatoes. It’s estimated that it will hit $25.5 billion by 2027. That growth will come from a combination of private and public support; EV charging networks found a place in President Biden’s recent Infrastructure Bill, which set aside $7.5 billion to fund the build-out of 500,000 public charging stations, a goal that will form a coast-to-coast network. According to estimates from the US Energy Department, reaching that goal by 2030 will require annual installations exceeding 11,000 charging stations.
The build-out is just the beginning. A nationwide public charging net work will bring with it a host of jobs in manufacturing, distribution, maintenance – all in all, it will be a boon for companies involved in the EV charging market. This will include the big automakers, and the smaller EV companies, who are all working on charge points that can sold with their cars, but will also include a host of pure-play EV charging companies.
The pure-plays will deserve a second look from investors. While the market is still young, and most of these companies are generating very little in the way of a revenue stream or profits, they’ve still been valued high in recent months. This is mainly a function of investors’ desire to buy into a growing market early.
We can get a taste of the opportunity here by looking at some of those pure-play charging companies. Using the TipRanks platform, we’ve pinpointed two such companies. These are Buy-rated stocks, with plenty of upside potential – and they’ve both gotten recent approval from the Wall Street analysts. Let’s dive in.
Solid Power (SLDP)
We’ll start with Solid Power. This company is an industry leader in the development of all-solid-state rechargeable battery technology – a tech widely seen as the next step forward and a likely replacement for today’s lithium-ion batteries. Solid Power’s battery design, using solid sulfide electrolytes, is safer than lithium-ion systems, and more stable at high temperatures.
As it prepares for the expected boom in the charging and battery market, Solid Power has also just gone public. The company completed a SPAC merger in December, with Decarbonization Plus Acquisition III; the transaction was approved by the SPAC’s shareholders early in the month, and the SLDP ticker hit the NASDAQ on December 9. Solid Power realized $542.9 million in new capital from the business combination.
In its short time as a public company, Solid Power has attracted the attention of Needham analyst Vikram Bagri, who sees several points for investors to consider.
"SLDP is one of a handful of solid state battery (SSB) developers in the world, and we think it has the potential to emerge as a leader for several reasons: 1) To separate itself from its peers SLDP has charted many paths to success with a diversified business model. The company aims to be a leading producer of sulfide-based electrolytes, which positions it as a cog in the SSB value chain. SLDP is also developing three unique cell designs that incorporate its sulfide-electrolyte and plans to license them to OEMs and battery manufacturers, 2) SLDP is capex-light and fully funded through commercialization in 2026, 3) The company is backed by two industry heavyweights in Ford and BMW which validates its technology and mitigates the associated risk, and 4) SLDP can realize upside to our estimates if it strikes a deal with other OEMs or achieves a higher EV market share for Ford and BMW sales," Bagri opined.
These reasons back up Bagri's Buy rating on the stock, and his $13 price target indicates confidence in 57% share growth for the year ahead. (To watch Bagri’s track record, click here)
Taking a broader look at Solid Power, we find that the stock has a Moderate Buy consensus rating; it’s new to the public markets, and has picked up 2 recent positive reviews. The shares are selling for $8.30 and their $13 average price target matches the Needham view. (See SLDP stock forecast on TipRanks)
Beam Global (BEEM)
The next stock we’ll look at, Beam Global, lives at the intersection of solar power and EV charging. Its main product is the EV autonomous renewable charger, the EV ARC, a stand-alone solar-powered charging station that can fit into standard parking spaces and accommodate most EV models. The EV ARC can be deployed within a few minutes of delivery and operates off the grid for increased flexibility.
A key advantage of Beam’s EV ARC is that fast installation. Customers don’t need any permitting, construction work, or electric work get the station up and running – and once stalled, the solar-powered station won’t run up any utility bills. Beam has EV ARCs installed in 121 countries around the world; in the US, it is deployed in 96 cities across 13 states. The EV ARC has found a niche with vehicle fleet operators, and the company’s customer list includes more than two dozen government agencies and municipalities in California, and that state has another 52 systems on order. In recent months, the company has also announced new deployments in Charlotte, North Carolina; San Jose, California; and New York City.
Beam’s most recent quarterly report, for 3Q21, showed strength on several metrics. Revenue came in at $2.02 million, a Q3 record for the company and a 63% year-over-year increase. Looking ahead, the company reported a work backlog of $7.1 million, its highest ever and an important indicator of future revenues. The sales pipeline also expanded, growing from $50 million to $75 million. New orders in the third quarter exceeded $5 million.
Despite this growth, BEEM shares are down; the stock has lost 76% in the past 12 months. This drop has come even as Beam’s product faces a higher-demand universe. Major EV manufacturers such as Ford and Tesla have increased their deliveries recently, and that can translate into demand for Beam’s compatible product.
Maxim’s 5-star analyst Tate Sullivan has this in mind when he writes: “More EVs on the road should increase customer demand for public EV charging stations, including BEEM's off-grid EV charging product. TSLA delivered 308,600 EVs in 4Q21, above the 263k consensus. Deliveries increased 71% y/y and 28% q/q. We believe this pace of deliveries will continue to lead to more TSLA EVs on the road for each TSLA charging connection..."
"We forecast revenue increases to $3.0M in 4Q21, from $2.0M in 3Q21, and to $19.8M in 2022, from $8.5M in 2021,” the analyst added.
Sullivan’s revenue forecast supports his Buy rating on BEEM, while his $50 price target implies a robust upside of 248% in the next 12 months. (To watch Sullivan’s track record, click here)
Overall, the analyst consensus rating on BEEM shares is a Moderate Buy, based on a mix of 2 Buys and 3 Holds. The shares are selling for $14.35 and their $40 average price target implies ~179% one-year upside. (See BEEM stock forecast on TipRanks)
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.