Since early November, electric vehicle stocks have soared, but not early-stage hybrid electric truck maker Hyliion Holdings (NYSE:HYLN). Unlike its rivals, many of which have gone parabolic, as “EV Mania” gets a second wind, investors have been cautious about putting more into Hyliion stock .
Why? Many reasons. Between confusion over its use of “renewable natural gas,” along with uncertainty over its business model, it makes sense investors have avoided this name.
Other EV stocks, like Lordstown (NASDAQ:RIDE), Nio (NYSE:NIO), and Workhorse (NASDAQ:WKHS), have much more digestible growth stories.
Yet, the uncertainty surrounding Hyliion may mean opportunity. That is to say, investors may be calling this all wrong. Instead of being an long-shot, it’s odds of success in the trucking space may be better than it appears at first glance.
However, take a hint from Wall Street’s lukewarm response. That is to say, don’t run out and buy this if you don’t own it yet. But, don’t head for the exits if you bought in at earlier prices, either. Consider shares a “hold” for now, and wait for new developments.
Why Investors Are Skipping Hyliion Stock
It’s no surprise EV Mania hasn’t helped Hyliion shares go parabolic once again. Why? Simply put, the story behind this “story stock” is much more murky than that of rivals. How? Three reasons.
Firstly, the unique use of “renewable natural gas” gives the impression its vehicles are not “zero emissions.”
Secondly, investors may be rightfully concerned about its short-term business model. InvestorPlace’s Alex Sirois dove into this in his Nov 24 article on HYLN stock. As he discussed, the company’s near-term plan (installing it hybrid electric powertrain into existing trucks) comes with many hurdles. Thirdly, even with ambitious revenue projection, investors are also doubtful that it’s long-term strategy will deliver.
The first of its Hypertruck ERX vehicles roll off the assembly line about a year from now. But, between now and then, the company could experience some hiccups, which may scare off speculators.
This grab bag of unanswered questions and uncertainty may be what’s keeping shares from heading back toward prior highs. Yet, this lack of parabolic price action may mean opportunity if shares continue to head lower.
Yet, Uncertainty May Mean Opportunity
We’ve talked about the bear case for Hyliion stock, let’s now take a look at the bull case. What’s the bull case? That investors have called it all wrong. Far from a long-shot, this company’s hybrid electric trucks may have the edge over the competition.
For example, investors may not fully understand its use of “renewable natural gas.” Despite the name, we aren’t talking about fossil fuels. It’s simply another way of saying “biofuel.” While not as “green” as fully electric, the technology is still “zero net emissions.” And, for now, that may be enough to garner demand.
As our Matt McCall put it Nov 25, “renewable natural gas,” or R/CNG, remains one of the best potential technologies out there, environmentally speaking. For now, until technology matches the needs of the trucking industry, this may be the most viable eco-friendly substitute for diesel-powered trucks.
In short, good reason why Hyliion may outfox its rivals, including Nikola. However, while the use of R/CNG is a positive rather than a negative, this alone doesn’t guarantee success for this early-stage truck maker.
More importantly, can this company live up to its sky-high growth projections? That is to say, its 2024 revenue and EBITDA projections of $2.1 billion, and $602 million, respectively.
Sure, with its war-chest of SPAC cash, as well as its asset-light business model, it could scale up that quickly. Yet, with pre-order numbers still far behind that of other early-stage EV companies, its work remains cut out for it.
And, if we see any hiccups along the way? Expect shares to fall far from where they stand today (around $22 per share).
Nevertheless, Consider Hyliion Stock a Hold for Now
So, does it make sense investors have overlooked this electric truck play? Partially. With a much cloudier growth story than say, Lordstown, it’s no shock investors haven’t gone hog wild bidding up shares.
But, there’s still much to make a bull case about Hyliion stock. At first glance, its unique use of “renewable natural gas” may not sound “green. Yet, on closer inspection, it’s clear this net-zero emission biofuel technology may be the bridge that moves trucking from diesel to fully electric.
That being said, it’s far from a slam dunk. In the coming year, any evidence it’s falling short of expectations could mean further downside from today’s prices.
So, what’s the verdict on HYLN stock? Consider shares a “hold” for now. If you bought in at lower prices, let it ride. Otherwise, wait for a pullback to enter a new position.
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.
