|Bid||0.00 x 1000|
|Ask||0.00 x 1000|
|Day's Range||19.76 - 23.20|
|52 Week Range||9.70 - 35.95|
|Beta (5Y Monthly)||N/A|
|PE Ratio (TTM)||381.89|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Wall Street is getting increasingly bullish about U.S. electric-vehicle stocks, but it isn’t clear if that will continue as more research emerges.
(Bloomberg Opinion) -- The chief executive officer of Volkswagen AG, Herbert Diess, has predicted that within five to 10 years the world’s most valuable company will be a carmaker. Given how much investors have been bidding up the shares of Tesla Inc. and other electric vehicle stocks, it might happen sooner.Tesla’s market value soared past $540 billion this week — equivalent to 250 times its expected earnings this year — meaning it’s now the world’s 10th-most valuable listed business, according to Bloomberg data. A trio of New York-listed Chinese electric-vehicle groups — Nio Inc., XPeng Inc. and Li Auto Inc. — are worth a combined $154 billion. None of the three is profitable and together they delivered fewer than 30,000 vehicles during the most recent quarter, just over 1% of Volkswagen’s car sales volumes.Arrival Ltd., a U.K.-based electric-bus and van startup that’s poised to go public by merging with a special purpose acquisition company, is valued at almost $16 billion after the SPAC’s shares more than doubled in a week. It won’t start producing vehicles until late next year.(1)The electric revolution is real and the shift away from combustion engines is accelerating. From a climate perspective, it’s great that investors are allocating capital like this. Still, valuations look mighty bubbly. The potential for disappointment is massive, particularly for the newest crop of EV makers that are yet to generate meaningful revenue.Like all financial bubbles, this one is driven by dreams of enormous wealth. Elon Musk has overtaken Bill Gates as the world’s second-richest person. Scottish investment manager Baillie Gifford & Co., an early Musk backer, recently cashed out billions of dollars in Tesla stock but retains a 3.7% holding worth about $20 billion. Baillie Gifford has more than one horse in the EV race: Its Nio stake is worth almost $6 billion. The Chinese company’s U.S-listed shares have surged 1,235% this year. Nio’s recent history shows the perils of electric-vehicle stocks. It warned in March of substantial doubt in its ability to continue as a going concern, having burned through $4 billion of cash in three years. It survived thanks to a local government bailout. Tesla has been on the cusp of bankruptcy at least twice since 2003. Those now joining the electric race claim to have learned lessons from these near-death struggles but there’s little to suggest their fates will be any less volatile.Competition is intense and while electric motors are simpler to build than combustion engines, developing a vehicle that’s safe, reliable and exciting is incredibly difficult. Incumbent giants such as Volkswagen and General Motors Co. are much better capitalized and they’ve far more experience managing supply chains and building brands. After a slow start, they’ve gone “all-in” on EVs. They won’t be shoved aside easily. Several factors have driven electric-vehicle stocks to these giddy heights. The U.S. Federal Reserve has stoked a speculative frenzy by cutting interest rates to zero, and bored millennials trading stocks at home on Robinhood have caught the EV bug. Electric-vehicle companies know how to market themselves to this crowd: Workhorse Group Inc. says its delivery vans can be paired with a drone, while XPeng emphasizes its autonomous-driving capabilities. ElectraMeccanica Vehicles Corp.’s “Solo” model has just three wheels. Then there’s 2020’s hottest financial fad: SPACs. Many have merged with electric-vehicle groups, and one peculiarity of these deals is that the companies are allowed to publish detailed multi-year financial forecasts, unlike in a regular initial public offering. These projections are often extremely bullish. Like Arrival, Fisker Inc. — an asset-light electric-auto business whose shares have soared — is yet to commence commercial sales. Even Musk is worried about SPACs, though he hasn’t said which ones.These new companies claim to have a solution for the manufacturing difficulties and massive capital outlays that almost sank Tesla. Drawing a comparison with the way Apple Inc. outsources phone production to Foxconn Technology Group, Fisker plans to subcontract manufacturing of its Ocean SUV to Canadian auto-parts supplier Magna International Inc. Electric- and hydrogen-truck maker Nikola Corp. is pursuing a similar strategy with partners GM and CNH Industrial NV. Others are taking a different approach. Electric-pickup startup Lordstown Motors Corp. acquired a factory from GM and has licensed technology from Workhorse to speed its market entry. Not to be outdone, Arrival claims to have reinvented the car assembly line. It plans to construct smaller, cheaper “microfactories” situated closer to where products are sold. Greater automation will reduce the need for human labor, it says.However you produce vehicles, though, there’s plenty to trip you up. More than a third of Workhorse’s factory staff have had to down tools because of suspected coronavirus infections. Li Auto recalled all 10,000 electric SUVs produced before June, after it found a potential suspension problem. Workhorse and XPeng both warned recently of battery supply bottlenecks. A big test for wannabe Teslas will come when they’ve burned though their cash and need to ask equity and debt investors for more, as Tesla and Nio have done repeatedly. ElectraMeccanica warned in its latest accounts that its “ability to continue as a going concern will depend on our continued ability to raise capital on acceptable terms.”All of this may have short sellers licking their lips, but Tesla’s rise shows the danger of betting against the bubble. Nikola was the subject of a scathing report from Hindenburg Research that questioned its technology, and which forced the departure of its chairman. Yet its market capitalization now exceeds $11.5 billion.Diess may be right about carmakers becoming the most valuable companies. It’s inevitable, however, that some won't make it.(1) Basis of calculation: the transaction at $10 a share valued Arrival's equity at $6 billion. Shares of the CIIG Spac are now trading at $26.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
After ripping past $25 per share without skipping a beat, could Switchback Energy (NYSE:SBE) stock soar up to $50 per share? Given the extreme enthusiasm behind this name, it’s possible in the near-term. Source: Michael Vi / Shutterstock.com This SPAC (blank-check company) is just weeks away from completing its merger with EV infrastructure company ChargePoint. Investors may be bidding it up now in anticipation of the shares continuing to climb once the deal closes before year’s end. Yet that’s not the only factor sending shares to the moon. Joe Biden’s victory in this month’s U.S. presidential election is a tremendous boost for the EV industry. That’s especially true for Switchback, given its focus on the infrastructure side of this industry.InvestorPlace - Stock Market News, Stock Advice & Trading Tips But while there’s reason to be excited, watch out! The current winds are clearly blowing in ChargePoint’s favor right now. However, that does not completely justify its current, rich valuation. Much of the recent gains have more to do with speculation than a material change in its outlook. Sure, the shares could keep climbing in the coming weeks. But buying them today is a bet that the “EV bubble” can continue indefinitely. While this industry’s growth is set to accelerate this decade, that doesn’t mean we won’t see an epic correction of the sector, like the one that occurred 20 years back when the “dotcom bubble” burst. So, with this in mind, what’s the call? Keep this EV play on your radar, but wait for it to drop further before buying its shares. 10 Best Stocks to Buy for Investors Under 30 Why is SBE Stock Skyrocketing? As mentioned above, there are two clear reasons why Switchback’s stock has soared this month. First is the upcoming closing of its acquisition of ChargePoint. Given how strongly EV SPAC stocks like Nikola (NASDAQ:NKLA) and Lordstown (NASDAQ:RIDE) performed after their deals were completed, it’s clear that investors want to get into SPACs before their mergers are completed. Secondly, the election of Joe Biden is a big deal for Switchback, soon to be ChargePoint, stock. As InvestorPlace’s Joel Baglole discussed in his Nov. 10 column, the President-elect wants to invest heavily in building America’s EV-charging infrastructure. But, while this could be seen as an indirect boost for EV makers like Tesla (NASDAQ:TSLA) and Lordstown, it would be a direct game-changer for ChargePoint. However, these recent positive developments are just icing on the cake. The prospects for ChargePoint were very strong long before Election Day. Prior projections called for 60% compound annual revenue growth through 2027. With the latest electoral development, this company looks poised to not only meet, but beat its ambitious revenue-growth goals. Yet, while SBE stock isn’t hurting in the catalyst department, it may not be wise to chase it at today’s prices. That’s because we could be near a correction of stocks in this “too-hot-to-touch” sector. How There’s Still a Risk of a Pullback in Switchback Given the risk of the “EV bubble” bursting or at least correcting, buying Switchback today may not be the best move. Granted, ChargePoint remains in the catbird’s seat. With soaring demand for EV infrastructure, and the U.S. government looking poised to shower this sector with trillions in capital, no one should bet against it. And, given its estimated $493 million in cash following the merger, chances are it has enough funds to get over any “growing pains” as it scales into a massive enterprise. Simply put, the risk isn’t posed by the company itself. Rather, there’s a risk that the winning EV sector will suddenly stop winning and start to head lower. As I discussed in a column about SBE stock published in October, there’s a massive risk of the valuation of EV stocks contracting. In other words, even as the underlying industry grows, the shares of EV companies could decline, as investors realize they are overvalued. That doesn’t mean Switchback’s shares will give up all of their impressive 2020 gains. But why buy its shares now for around $36 each when you could enter a long-term position at a much more favorable price? With Shares Fully in ‘Bubble Mode,’ Be Careful While there’s a big risk of overpaying for Switchback at today’s prices, don’t avoid it completely or short it. The underlying trends and unpredictable investor excitement about EVs make SBE stock too dangerous to bet against. However, it’s not a screaming buy at any price, either. With the risk that the “EV Bubble” will finally burst in 2021, the risk/return ratio of SBE stock doesn’t look favorable now. So what should investors do with Switchback? Consider any further selloff a good opportunity to enter a long-term position in the name. But right now, stay on the sidelines. On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article. Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner Radical New Battery Could Dismantle Oil Markets The post As Shares Go Parabolic, Tread Carefully With Switchback Stock appeared first on InvestorPlace.