With the broader push toward clean energy, and now as President Joe Biden sets out to forge a new path for the U.S., the case for Hyliion Holdings (NYSE:HYLN) seems compelling. At the basic level, HYLN stock is an investment in next-generation commercial transportation.
If the underlying company could crack the code of both efficient and environmentally friendly at such a scale, the implications for HYLN and the electric vehicle industry is profound.
As well, what I respect about Hyliion — and I feel this factor doesn’t get as much appreciation — is its realistic approach. The company’s flagship innovation, the Hypertruck ERX, features a fully electric drivetrain. However, to catalyze the motoring process, the Hypertruck utilizes a generator fueled by renewable natural gas.
At first, this might seem anachronistic to incorporate a fossil fuel into a next-gen transport vehicle. However, nothing beats out the energy density of this traditional fuel source. While technologies such as solid-state batteries promise to change this paradigm forever, so far, this is more aspiration than reality. For evidence, just check out the cratering of QuantumScape (NYSE:QS).
Through a hybrid approach, however, Hyliion can take the best of both worlds: the energy density of fossil fuels and the efficiency and environmentally friendly profile of electric powertrains. In addition, the company can extract greater range from either its Hypertruck or its modular hybrid powertrain that can be installed on select existing trucks. Put another way, Hyliion is ready to go, which makes HYLN stock intriguing.
Competitive Overhang Stills Weigh on HYLN Stock
Still, not everything is bright and rosy for the transportation technology firm. As InvestorPlace contributor Faisal Humayun noted last week, competition is becoming a concern:
CIIG Merger (NASDAQ:CIIC) recently announced a business combination agreement with Arrival, which is also in the commercial EV business. Arrival has orders worth $1.2 billion from U.S. Postal Service with strategic partners that include Hyundai (OTCMKTS:HYMTF) and Kia Motors. The company has an exciting product pipeline that includes an electric bus and an electric van. In addition, Arrival is creating micro factories to enable low-cost production.
And Arrival is not the only company. Tesla (NASDAQ:TSLA) is also targeting the commercial EV segment with its truck. Workhorse (NASDAQ:WKHS) claims to have technology validation from companies like FedEx (NYSE:FDX) and United Parcel Service (NYSE:UPS). Workhorse is also expecting an order worth $6.3 billion from the Postal Service.
To be sure, a profitable venture will always attract rivals. However, to be fair to HYLN stock, these concerns may not be as horrifying as they might initially appear. For instance, I would classify Arrival as an aspirational play. Even with Tesla eyeballing the commercial EV segment, fully electric platforms have the same overhang: they’re unproven at this scale.
However, that doesn’t mean you should ignore competitive threats to HYLN stock. As many have discussed, a short-seller report suggests that Hyliion’s own claims of efficiency may not be up to snuff. That would certainly invite the vultures to an easy meal if the allegations are true.
Also, I don’t like the economic environment. From the latest data, the national employment level has flatlined since October 2020. More worryingly, the employment level for college-educated workers is in the red since August.
Until these stats improve, fleet owners can’t justify major overhauls to their transport vehicles. You’d imagine that would have a negative impact on HYLN stock.
A Technical Case for Hyliion
For these and other reasons, I haven’t been bullish on HYLN stock. Indeed, I’ve been more cautionary than anything. However, upon closer examination, I could be wrong about the trajectory of Hyliion shares. If so, I think it’s worthwhile to consider what I’m seeing.
First, HYLN stock has stabilized around the $16 to $17 level for several weeks. While that doesn’t guarantee an upside move, it also demonstrates that stability has been established among traders. Frankly, if Hyliion was a junk company as some bears assert, it probably wouldn’t be steady like this.
Second, HYLN may have given off a bullish signal. In recent weeks, shares have featured generally declining prices and volume. That might indicate that the weak hands have been shaken off Hyliion. If that’s the case, HYLN is subject to move higher once bullish sentiment moves in.
Does this make sense? Fundamentally, no. But we must acknowledge that we’re in the new normal. For the stock market, that means “disassociation” from reality is reality — at least for the time being. Bottom line, you don’t want to stand in front of this train if it picks up momentum.
Risky Trade for the Speculator
Whether you want to engage HYLN stock will probably depend on how much time you have to dedicate watching over your portfolio. If you like to buy and hold strong, steady names, I don’t think Hyliion is the right boat. But if you’re looking to speculate on short-term profits, this could be the ticket.
Regarding the commercial transportation business, Hyliion’s hybrid technology makes the most sense and will be the quickest to launch. However, there’s still an infrastructural issue that will be addressed. And a weak economy disincentivizes fleet owners from making too many wholesale changes.
But if you’re looking for a quick trade, it is very possible that I missed a bullish technical signal for HYLN stock. Fortunately, there’s still time to profit from this speculative thesis… if that’s how you roll.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.