Making Sense of Hyliion’s Steep Decline

The old adage goes “in like a lion, out like a lamb.” For Hyliion (NYSE:HYLN), it sure seems that way. Earlier this summer, HYLN stock roared up to $59 per share for a cool 600% gain in the span of a few months. However, the shares have retreated recently, as Hyliion has lost more than two-thirds of its value since its recent peak.

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Much of the excitement around Hyliion came from its then-pending merger with Tortoise Acquisition. Like many hot electric vehicle (EV) companies, Hyliion chose to go public via a special purpose acquisition company (SPAC). The merger between Tortoise and Hyliion officially closed on Oct. 14, and the ticker symbol changed to “HYLN” on that day.

Since then, however, the shares have fallen from $29 to below $20 as investors’ interest in the name  has faded. With the deal out of the way, that imminent catalyst has come and gone. That decline could set up an opportunity, however, to buy Hyliion stock on weakness.

Hyliion’s Mission

Hyliion seeks to help make America’s trucking force go green. The company says that the big problem for truckers today, as far as sustainability goes, is sunk costs. It’s simply not practical to replace everyone’s trucks overnight.

Hyliion offers an electrified powertrain that can convert existing trucks  to carbon-neutral or even negative-emissions vehicles.

Hyliion has a lot of potential and promising attributes. Its Hypertruck ERX truck should have a range of more than 1,000 miles, making it ideal for long-range jobs.

It also accelerates quickly and can carry heavy loads.  A number of big-name trucking companies have agreed to buy ERX vehicles once they are produced. All in all, if things go according to plan, Hyliion could turn into quite a force over the next few years.

Not Generating Significant Revenues Yet

Hyliion says that it is “delivering tomorrow’s electrified fleets today.” However, it would be more accurate to say that it will be delivering them in two years or so. In a recent presentation, Hyliion acknowledged that it has virtually no revenue at the moment.

It anticipates selling 20 units and generating $1 million of revenue this year. Next year, it foresees 300 units sold and $8 million of revenue. Only in 2022, according to Hyliion’s projections, will it reach critical mass, selling thousands of units and generating $344 million of sales.

To be clear, there’s nothing wrong with that. Hyliion has what seems like impressive technology and has multiple patents. That said, after Nikola (NASDAQ:NKLA) rolled in with its dog-and-pony show, it’s worth doing extra due diligence on similar EV companies.

That’s particularly true since Nikola, like Hyliion, went public via a SPAC and emphasized what it would accomplish in the future rather than its current financial results. Hyliion has a great story, to be sure, but I’ll trust it more when it starts to report solid revenue. As it is, 2022 is still quite a long way off, given how quickly the electric-vehicle sector is changing.

I’d also point out that there have been some allegations about Hyliion’s proprietary technology. And InvestorPlace columnist Todd Shriber included Hyliion in a list of stocks that could potentially go to zero.

Some short-sellers are alleging that Hyliion purchased much of its designs for a low sum, and they say that there is no concrete evidence to support  the company’s more ambitious claims. That’s why it’s so important to see if the company’s revenues actually arrive in 2022 as promised.

The Verdict on HYLN Stock

HYLN stock is getting a lot more interesting as its share price continues to decline. I don’t see any way to justify buying the stock at $50. But with the shares below $20, I understand their speculative appeal. Indeed, investors could do far worse in the EV space.

Still, with no revenues yet or overwhelming evidence of a compelling business, Hyliion is a “prove-it” story. And after the Nikola fiasco, investors are a lot less tolerant of companies that don’t have meaningful sales.

After such a big drop, the odds favor a rally by HYLN stock in the coming weeks. That said, I’d wait for its technology to become more demonstrably trustworthy before investing a large sum in the shares.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. 


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