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Lightning eMotors Stock Is an EV Play That Will Only Go Up in the Long Term

Lightning eMotors (NYSE:ZEV) stock is a strong long-term play for investors seeking relatively unknown electric vehicle companies.
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This article was originally published by Investor Place

Lightning eMotors (NYSE:ZEV) stock is a strong long-term play for investors seeking relatively unknown electric vehicle companies.

Source: Shutterstock

The Colorado company produces electric fleet, medium- and heavy-duty vehicles including delivery trucks, shuttle buses, passenger vans, chassis-cab models and city transit buses.

It retrofits Ford (NYSE:F) and General Motors (NYSE:GM) vehicles as well as transit bus models with electric drivetrains. This reduces fleet costs which would otherwise be spent on new, fully electric vehicles.

The easiest way to understand the opportunity presented by Lightning eMotors is to start at the company’s recent earnings report, and then we’ll look at the massive deals it has signed as well.

ZEV Stock Has Huge Potential 

Investors looking quickly at Lightning eMotors’ Aug. 16 earnings report might not see a potentially massive company at first blush. The company reported $5.9 million in Q2 revenues, which was a 509% increase on a year-over-year basis.

Lightening eMotors sold 37 zero-emission vehicles and powertrain systems in the period. Investors might logically conclude that stocks like Nio (NYSE:NIO), which cost 3-4x more than ZEV stock make more sense given it sold nearly 600X more vehicles in the same period. That’s an apples to oranges comparison, but still one investors might make. 

Further, investors might shun Lightning eMotors because it posted a net loss of $46.1 million in the quarter, up from the $2.8 million loss a year prior. Few would blame investors for looking the company over in favor of other opportunities. 

But that could be a huge mistake for several reasons. One of which is the company’s massive backlog and thus huge revenues to come. 

Demand Backlog 

As reported in its recent earnings release: “As of June 30, 2021, the Company had an order backlog including full vehicle powertrain system conversions, powertrain systems to be sold directly to customers, and charging systems of approximately 1,600 units valued at $168.4 million, up 508% and 502%, respectively, from the prior year period.

The company also states that its sales pipeline exceeds the $1 billion threshold, at $1.290 billion.

There is, as you may suspect, a rub here. Firstly, it’s risky to rely on projections of future revenue as opposed to actual results. Secondly, the company notes that Covid-related delays in chassis production have caused it to withdraw prior guidance. 

Now the company anticipates between $4 to $6 million in revenues in Q3 and between 28 to 40 vehicle sales. That indicates that while there’s massive potential, the company will remain flat on a revenue basis in Q3 at best. 

Even so, there are bigger factors that have six of seven current analysts with coverage of ZEV stock rating it a buy.

Buffett/Berkshire Backing

Lightning eMotors signed a deal on Aug. 10 that fundamentally alters its trajectory. It inked an $850 million deal with Berkshire Hathaway (NYSE:BRK.B) company Forest River to deliver 7,500 vehicles in the U.S. and Canada by 2025. 

Forest River is the largest shuttle bus manufacturer in North America. It is the most meaningful deal in the history of the company and alleviates current concerns investors have to a degree. 

“This has the potential to be the largest contract ever in the electric shuttle bus market, and we believe it will be the catalyst for other large commercial vehicle OEMs and fleets to accelerate their adoption of commercial electric vehicles,” said Lightning eMotors Lightning eMotors CEO Tim Reeser notes that:

Verdict

ZEV stock looks nearly certain to rise over the long term. It simply has to fulfill its contract obligations now. Those obligations might be unnecessarily complicated due to covid supply chain constraints, but they’ll be fulfilled. 

Forest River and its conservative minders in Berkshire Hathaway certainly wouldn’t have awarded it such a contract if there was any doubt. Don’t expect ZEV stock to skyrocket overnight, but the future is bright.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”

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Energy & Critical Metals

Lightning eMotors Stock Is a Buy on More Than Just Its Berkshire Connection

The electric vehicle (EV) revolution isn’t just about cars. It also involves zero-emission buses, powertrains and charging products. Lightning eMotors (NYSE:ZEV)…

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The electric vehicle (EV) revolution isn’t just about cars. It also involves zero-emission buses, powertrains and charging products. Lightning eMotors (NYSE:ZEV) provides all of these and more, which makes ZEV stock one of the more interesting plays in the EV space.

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Besides, that’s not the only angle worth pursuing here. As InvestorPlace contributor Chris MacDonald pointed out and William White reaffirmed, Lightning eMotors appears to be a prime short-squeeze target.

We’ll certainly explore ZEV stock’s potential as a short-squeeze candidate. However, there are other reasons to take a long position in Lightning eMotors.

Among those reasons are a pair of deals valued in the millions of dollars. Better yet, one of those deals involves a holding company whose CEO should be very familiar to many investors.

Let’s rewind the clock to April 21, which is when shell company GigCapital3’s stockholders approved a special purpose acquisition company (SPAC) merger with Lightning eMotors.

GigCapital3 fulfilled its purpose and ZEV stock was born on May 7. The share price was around $8.67 at that time.

By Aug. 9, the stock had drifted down to $6 and change. However, the bearish price trajectory would soon be reversed.

On Aug. 10, ZEV stock suddenly shot up to $11.60. Was this because of a Reddit-fueled short-squeeze raid?

More likely, it was spurred by a value-added deal involving a well-known holding company – but we’ll get to that in a moment.

At the same time, we can’t ignore the short-squeeze potential with Lightning eMotors. Not long ago, MacDonald observed that ZEV stock’s short percent of float was extremely high, at around 35%. He also noted the company’s high borrow fee rate of 87%, which could make it difficult for short sellers to hold their positions for a long period of time.

In any case, ZEV stock has settled at $8 and change today, well below the pre-SPAC-deal-announcement price, so there may be a bargain here.

The Buffett Connection

If anything makes Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) special, it’s the renown afforded to its legendary CEO, Warren Buffett.

Anytime a smaller company gets a Buffett connection, investors perk up and take notice.

This is exactly what happened with Lightning eMotors as Forest River, a Berkshire Hathaway company and North America’s largest shuttle bus manufacturer, entered into a strategic partnership in August.

According to the press release, Lightning eMotors has been tasked with delivering up to 7,500 zero-emission Class 4 and Class 5 buses across the U.S. and Canada between 2021 and 2025.

This should keep the company busy and flush with capital as the deal has a potential estimated value of up to $850 million. Lightning eMotors CEO Tim Reeser is ecstatic about this arrangement, no doubt.

“This has the potential to be the largest contract ever in the electric shuttle bus market,” he said.

Another Power-Packed Deal

Just in case the $850 million Berkshire-backed agreement isn’t enough for you, here’s another deal to augment the bull thesis for ZEV stock.

On Aug. 31, the company announced a strategic partnership to manufacture and deploy zero-emission, all-electric Type A school buses.

This partnership is with  Collins Bus, a leader in manufacturing Type A School Buses and a subsidiary of Rev Group (NYSE:REVG).

Collins Bus is highly experienced in this niche market. In fact, the company has deployed over 70,000 buses over the past 50 years across the U.S. and Canada.

Moreover, this partnership should help Lightning eMotors move further into the school bus electrification market.

“Electrifying school buses just makes sense,” said Chief Revenue Officer Kash Sethi. “With predictable routes, dedicated overnight parking at school bus depots, fuel and maintenance savings, all-electric school buses now make a lot of operational and financial sense as well.”

The Bottom Line

There certainly could be short-squeeze potential here if Lightning eMotors becomes a target of the Reddit crowd.

Yet, that’s not the only reason to put ZEV stock on your radar.

With a Buffett-backed deal and a foray into the electric school bus market, Lightning eMotors could be the next EV business to ride to the top.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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Energy & Critical Metals

GM’s Battery Supplier Resumes Production

General Motors’ (GM) battery supplier LG Corporation has resumed production at its plants located in Hazel Park and Holland, Michigan. The supplier is…

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General Motors' (GM) battery supplier LG Corporation has resumed production at its plants located in Hazel Park and Holland, Michigan. The supplier is also to add capacity to produce more battery cells to meet the automaker's needs. Shares of the automaker fell 3.82% to close at $49.37 on Monday.

LG ramping up production should allow General Motors to begin shipping “replacement battery modules” as early as mid-October. The battery supplier has already implemented a new manufacturing process and enhanced its quality assurance programs to address the issue of battery fires that have recently raised concerns. (See General Motors stock charts on TipRanks)

Meanwhile, GM is to prioritize Chevy Bolt EV and EUV customers whose batteries were faulty and susceptible to catching fire. The automaker has already established a notification process to inform affected customers about the availability of battery replacement modules.

The new batteries will come with an extended limited battery warranty of 8-year/100,000-mile. Additionally, GM intends to launch a new diagnostic software package that will increase the currently available battery charging parameters. The diagnostic software will also detect abnormalities in the battery by monitoring its performance.

Recently, Barclays analyst Brian Johnson reiterated a Buy rating on the stock and lowered the price target to $68 from $71, implying 37.7% upside potential to current levels.

According to Johnson, chip shortages in the auto industry continue to impact General Motors' North America wholesales. Further, the analyst expects the company to post results inside its guidance range.

Consensus among analysts is a Strong Buy based on 13 Buys and 1 Hold. The average General Motors price target of $73.36 implies 48.6% upside potential to current levels.

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The post GM's Battery Supplier Resumes Production appeared first on TipRanks Financial Blog.

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Energy & Critical Metals

Lucid Motors Stock Should Keep Rallying, But Beware Future Dilution

The euphoria phase for Lucid Motors (NASDAQ:LCID) stock was over even before the completion of this year’s special purpose acquisition company (SPAC)…

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The euphoria phase for Lucid Motors (NASDAQ:LCID) stock was over even before the completion of this year’s special purpose acquisition company (SPAC) business combination.

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After plunging from highs of nearly $65, LCID stock has been in an extended period of consolidation. It trades just barely above $24 at this writing.

I believe that LCID stock is positioned to rally in the coming quarters. Further, the broad trading range of $20 to $25 is likely to serve as a long-term support level for the stock.

It’s worth noting that in the beginning of September, LCID stock traded at around $17.80. It seems likely that this rally will sustain.

The electric vehicle industry is already very competitive. However, I want to point out two important factors.

First and foremost, according to the International Energy Agency, there were three million electric vehicles on road in 2020. The number of electric vehicles is expected to increase to 145 million by 2030. Clearly, there is a big addressable market.

Secondly, Tesla’s (NASDAQ:TSLA) market share has declined to the lowest level in two years. As of April, the company had an 11% share in the electric vehicle market.

With innovation, the market is likely to remain competitive and new entrants are likely to gain market share.

LCID Stock Upside Catalysts

It’s worth noting that Bank of America recently initiated coverage on LCID stock with a price target of $30. Innovative technology and attractive product are among the key reasons for the bank being bullish.

Lucid Motors recently confirmed that “Lucid Air Dream Edition Range has been officially accredited with a range of 520 miles by the EPA.” This is a good example of the point on ‘innovation’ that Bank of America made in their thesis.

The company’s first model, Lucid Air Dream Edition, is already fully reserved with over 10,000 orders.

Lucid Motors has already completed the first phase of construction of the AMP-1 factory. Once the company begins delivering the first model, the stock is likely to witness further upside.

It also seems as if Lucid is likely to pursue aggressive geographical expansion.

The company already has an employee base of over 2,300 with a presence in North America, Europe and the Middle East. For now, the company plans to open more retail and service locations in the United States and Canada.

Further Fund Raising in the Cards

In terms of revenue, Lucid Air will be the growth driver for 2022 and 2023. The company plans to launch the SUV model (Project Gravity) towards the end of 2023. At the same time, Lucid said it plans additional manufacturing expansion in the next few years.

With sustained cash burn in the foreseeable future, equity dilution is a key risk. The company said it believes that there are ample funds for planned operations through 2022 but cash outflow is estimated at $3.3 billion for 2023 and $1.5 billion for 2024 by its own estimates.

This would require nearly $5 billion in cash infusion.

Lucid Motors expects to be free cash flow positive in 2025. However, sales estimates are optimistic and cash burn might sustain even in 2025. The key point here is that significant equity dilution is a certainty, though the dilution risk factor will be offset to some extent if vehicle deliveries growth is robust.

Therefore, if there is a significant rally from current levels, I would look to book some profits. Bank of America’s  (NYSE:BAC) price target of $30 seems like an attractive point for profit booking.

Concluding Views

Lucid Motors has ambitious growth plans for the next few years. In a very competitive space, innovation seems like the key catalyst for the company.

In the near term, a LCID stock rally is due after consolidation.

The company’s Lucid Air Dream Edition range of 520 miles in a single charge is already one upside catalyst. Commencement of production and vehicle deliveries is another impending catalyst.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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