Can Hyliion Holdings Tell a Story That Stands Out in a Crowded Field?


The biggest thing that’s changed since I wrote about Hyliion Holdings (NYSE:HYLN) in November is that the electric vehicle (EV) bubble has begun to lose a little air. However HYLN stock was punished more than most. That’s not a surprise. It was getting very crowded in the EV sector.

A 3D rendering of a green truck in front of a blue sky.
Source: Shutterstock

Furthermore, Hyliion was entering the scene via a special purpose acquisition company (SPAC). That was another trend of 2020. But unfortunately, it had the effect of listening to Charlie Brown’s teacher. When it becomes another day, another SPAC, they all start to sound alike.

In short, the stock of any company that had anything to do with producing an electric vehicle of any type was going higher. And if you didn’t fawn over a particular company, then you were writing a “hit piece” to rob speculative investors of their bounty.

Well, it may not be that dramatic. But the situation that investors find themselves in is this: As more players enter the EV sector, there will be more companies competing for investor dollars.

However the risk of investing in HYLN stock (or many of these stocks) is not that it might fail. The risk is that investors may have to wait many years before they know.

And that’s one reason why I believe Hyliion bulls should be more comfortable with shares trading in the teens. At that price it’s much easier to embrace the uncertainty.

HYLN Stock Story Is Just Getting Good

I look at the EV sector as a series of biographies. There have been many biographies that I’ve enjoyed very much once I get about 100 pages into them. It just takes a long time to get to the interesting part. If I get to that point and I can understand why the author chose to focus on a specific character trait from the subject’s youth, all the better.

Right now, the story is just getting good in the EV sector. But we’ve had to wade through a year where we need a cast of characters to remember which company is involved in what part of the sector.

But now that things are heating up, it means that Hyliion has an opportunity to convince investors that they need to follow this story to the end.

If you’re not aware, Hyliion is manufacturing an electric drivetrain for Class 8 vehicles. But what has seemed to get many investors excited was the Texas company’s existing hybrid solution that can be retrofitted unto existing trucks.

Hyliion Needs to Prove its Case

On the surface, Hyllion checks many boxes. It has patented technology. It has a solution that fits an immediate need in an industry that wants to electrify and is under growing pressure to do so.

But if you’re going to invest real dollars into the company, you have to realize that it’s possible that the company may never reach its promise.

Hyliion presents investors with a circular debate and one the market will ultimately decide. One side can’t prove its case anymore than the other. There’s simply not enough actual data. Right now, it’s all just educated (perhaps) guesses.

For example, the company is set to bring fully electrified powertrains perhaps as early as this year, but more likely in 2022. But when that happens, it will be competing with other companies including Tesla (NASDAQ:TSLA). And Tesla will be manufacturing trucks in factories that they own rather than through third parties as is the case with Hyliion.

Is HYLN Stock Worth the Risk?

I closed my article in November advising that you might want to let HYLN stock fall into the mid-teens before making a speculative buy. At that time, it was trading at about $25. Today, it is in the mid-teens and so I’ll stand by the opinion I stated in my earlier article. At this price, Hyllion is an intriguing speculative bet.

One reason that makes me more comfortable in that assessment is that we’re starting to hear from the analyst community. The analysts are giving Hyliion stock a $23 price target which would give investors a nice profit from its current price even if you only wanted to hold it as a short-term stock. And right now, that’s how I would approach Hyliion and most of the startup EV companies.

A reader does not have an obligation to finish a book. It’s the job of the author to provide compelling prose or tale to continue on. As the EV story becomes more interesting, Hyliion needs to give investors a compelling reason to follow it down the road. Invest accordingly.

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

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.


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