After rising from $10 a share in June to a peak of $58.66 in September (a gain of 487%), Hyliion stock has fallen to $18.04 a share. And the decline looks persistent.
Since Nov. 27, the stock dropped 33%. Investors who hold a stake in Hyliion may want to sell now and cut their losses before things get any worse.
The company, which designs, develops, and sells electrified powertrain solutions for commercial vehicles, looks to have lost its luster and any momentum the stock seems to have evaporated, leaving its share price deflated.
Let’s take a look at what’s causing Hyliion’s stock to trend lower.
Claims and Counterclaims
Hyliion went public in October though a special purpose acquisition company (SPAC) deal. Essentially, the Cedar Park, Texas-based company merged with a shell company called Tortoise Acquisition in a deal worth $500 million.
Institutional and retail investors were initially keen on Hyliion stock, especially since the company claimed that its technology improves fuel efficiency of commercial trucks by as much as 30%. This seemed pretty impressive.
However, Bonitas Research came out with a report that said the company’s fuel efficiency claim is a lie. An external test of Hyliion’s technologies by PAM Transportation Services found only a small percentage improvement in the fuel efficiency of commercial vehicles. This debacle, which played out in the media, prompted many investors to sell Hyliion stock.
Beyond being accused of outright lies, many scientists have questioned the science behind Hyliion’s technology, claiming that, upon review, the electric component of the company’s underlying technology is not economically viable for commercial vehicles. These doubts raised with the science and technology further hurt investor confidence in Hyliion stock and caused many people to head for the exits.
A big challenge facing Hyliion right now is to win back investors. It also must instill confidence in the company and its ability to deliver claimed fuel efficiency.
Making matters worse for Hyliion, the company to date has recorded no revenue. Zilch.
The company had forecast $1 million of revenue this year. However, Hyliion’s financial situation apparently worrsened as 2020 progressed. In the third quarter, the company reported a loss of 76 cents per share compared to a year earlier loss of 45 cents per share. Hyliion did sign a natural gas fuelling partnership with American Natural Gas during the third quarter that included a pre-order agreement to purchase up to 250 Hyliion vehicles. But, unfortunately, that deal did little to boost Hyliion’s bottom line.
The company’s product and its revenue outlook are extremely uncertain right now.
The market for electric trucks and other commercial vehicles is extremely crowded and competitive. The global electric truck market was valued at $422.5 million in 2019 and is projected to reach $1.89 trillion by 2027 for a compound annual growth rate (CAGR) of 25.8% over seven years, according to Allied Market Research.
Hyliion’s electric powertrain systems are quickly being left in the dust by an industry that is advancing at breakneck speed. The company cannot afford the setbacks its been struggling with this year.
Pass on Hyliion Stock
As mentioned, the electric vehicle market is extremely crowded right now. Investors wanting exposure to the future of the global automotive industry have plenty of high flying stocks to put their money into — from Tesla to China’s Nio (NYSE:NIO). There’s no reason to take a chance on a risky company such as Hyliion. Not when most analysts give Hyliion stock a grade of “F” and warn investors away from the company. Maybe Hyliion and its 28-year-old Chief Executive Officer, Thomas Healy, can turn things around. But for the time being, there is no good reason for investors to risk their money on such a speculative and troubled stock. Take a pass on Hyliion.
On the date of publication, Joel Baglole held long positions in TSLA and NIO.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.