Hyliion Faces Several Obstacles to EV Success

It’s been a wild ride for shares of electric-vehicle hopeful Hyliion (NYSE:HYLN) and the outlook for HYLN stock in early 2021 appears to be more of the same.

an electric vehicle charging. image represents electric vehicle stocks
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Volatility has been a constant companion for the newly formed public company. Share prices whipsawed back-and-forth, wearing out swing traders and giving pause to all but the bravest investors. Despite the swings, HYLN stock has its fans and ended 2020 up comparatively since it emerged last fall.

Early investors who took profits at the high-water mark were rewarded. The prospects for everyone else are uncertain.

HYLN Stock at a Glance

Texas-based Hyliion Holdings is not an electric vehicle company in the mold of companies making sleek automobiles and SUVs that are powered by batteries. Hyliion wants to make its name in Class 8 trucks – what folks call tractor-trailer rigs. The company is developing a hybrid conversion platform and a fully electric system that utilize compressed natural gas and power electric drivetrains.

Hyliion reached the stock market by merging with a special purpose acquisition company last September.

Followers of the electric vehicle industry will recognize this process, as SPAC deals have been the rage for many EV companies to go public. Compared to an initial public offering, SPAC mergers are cheaper and faster to execute. They also deprive investors of information and vetting that arises when a company completes the traditional IPO process. It will be interesting to see the eventual studies of how investors and companies fared when SPAC deal shortcuts are taken.

Meanwhile, shares of HYLN stock surged around the merger date. The stock’s 52-week high is $58.66, compared to a low of $9.50. Currently, HYLN stock is trading around $16 a share.

The company has a market cap of about $2.5 billion.

Volatility Rides Shotgun with Hyliion

Prices of HYLN stock began rising in June as investor attention just prior to the SPAC merger. Shares tripled from the $10 range. The stock reached the $50s in September but started falling as the month ended. The decline reached $18 a month later.

When it comes to HYLN stock, fall isn’t only a season. Since Halloween, the stock has spiked and declined like a graph tracking sugar highs.

Here are two recent examples of the stock’s sensitivity.

On Nov. 30, HYLN stock dropped 18% on word that warrants held by early investors were being called by the company. The warrants had to be claimed by late December or they would be worth a penny. This spooked the market.

My InvestorPlace colleague Sarah Smith wrote a great article explaining the situation, which was triggered by the stock’s overall performance.

A couple of weeks later, on Dec. 16, shares spiked to nearly $20 on news that a Barclay’s analyst rated HYLN stock as “outperform” with a $20 price target. The InvestorPlace article by William White illustrates how Hyliion was benefiting from growing interest in the electric-vehicle industry.

What’s Holding HYLN Back?

There are some headwinds for Hyliion that likely are affecting the altitude of HYLN stock.

A key issue is financial. The company is not profitable and isn’t expected to be in the green for quite some time. Moreover, an article by SimplyWallSt predicts Hyliion’s earnings will decrease for the next three years. The article also says the company suffers from weak fundamentals.

Beyond financial, though, a larger issue is whether Hyliion’s products will be widely accepted by the trucking industry.

Trucks play a major role in our economy. Reliable and affordable transportation is crucial for the successful manufacture and delivery of goods in this country. Some transportation segments, such as last-mile delivery, can easily deploy battery-powered electric vehicles in their fleets. But this is much harder for tractor-trailer rigs. The technology for them simply isn’t there.

This brings us to the case Hyliion seeks to make for hybrids. And it seems logical that hybrid systems and alternative fuels can play a role in what looks to be a challenging conversion process.

The Bottom Line

What is not clear, at this point, is whether Hyliion is the company to lead the charge for hybrid systems to power tractor-trailer rigs. Questions have been raised about its systems and their performance. Price, performance and reliability will be key to gaining the trucking industry’s confidence.

On Nov. 13, I wrote that investors should pass on HYLN stock because of the numerous issues surrounding the company. That has not changed.

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

Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C. and began writing for InvestorPlace in 2020.

Article printed from InvestorPlace Media, https://investorplace.com/2021/01/hyln-stock-hyliion-faces-several-obstacles-ev/.

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