Right now, it seems like Hyliion (NYSE:HYLN) stock just isn’t what investors are looking for.
It’s not the hot new SPAC (special purpose acquisition company) merger. Hyliion already went through that phase: it was the hot new SPAC back in June, when the then-private company announced plans to merge with Tortoise Acquisition.
What was then Tortoise stock went from $10 to $35, retreated, then hit $55 amid what in retrospect looks like a bit of a mania for electric trucking stocks. The group’s leader tanked, and not long after HYLN stock began to follow it down.
Since the dust has settled, HYLN stock hasn’t done much of anything at all. It’s traded basically flat for two months now. That, too, doesn’t seem like what investors are looking for. As we are learning this week (if we didn’t already know), they’re looking for action.
From a long-term perspective, however, it’s not a bad thing that HYLN is out of the spotlight at the moment. And this is the definition of a long-term play: it’s a pre-revenue start-up, albeit one now listed on the public markets.
This is not a stock investors should want going higher — yet. But the good news is that HYLN still has the potential to make a big run at some point.
Is Hybrid Technology Viable?
There is another reason why Hyliion might not be capturing investor attention at the moment: it’s somewhat stuck in the middle.
After all, electric vehicle stocks have gone crazy over the nearly four months since the U.S. presidential election. Investors see the Biden Administration (and a Democratic-controlled Congress) as likely to subsidize the EV industry. Accelerated adoption means more revenue and more profits sooner.
Many of these EV stocks — particularly those that, like HYLN, went the SPAC route — are at the very beginning of their growth cycles. That’s not a surprise; the same is true for the industry as a whole.
And for investors in this market, which has prioritized growth for years, the lack of profitability and in some cases revenue isn’t discouraging. It’s encouraging. These stocks are blank canvases. Whether it’s EV manufacturers, component suppliers, or charging station developers, the “blue sky” scenarios for most of these names suggests absolutely massive upside.
One potential current problem for HYLN stock is that its case isn’t quite as attractive yet. Hyliion plans to begin with a hybrid offering, with much of its initial revenue likely to come from retrofitting legacy ICE (internal combustion engine) vehicles.
That’s not the kind of case that investors likely are excited about signing up for at the moment. It’s a logical strategy, as I’ve written before. But in this market, it’s not one that’s going to grab investor attention in the way that other EV stocks currently can.
Stay Patient with HYLN Stock
It bears repeating: the relatively weak trading of late almost certainly is a good thing.
Admittedly, “almost certainly” is an important qualifier. A short-seller took aim at HYLN in early November, though the stock rallied immediately after the report. Still, the relative underperformance of late suggests that investors might still give some credence to the questions raised at the time.
That aside, however, this mostly looks like a case where investor attention is elsewhere. If Hyliion can deliver on even some of its potential, that won’t stay the case for long.
After all, with the pullback, the stock is easily cheap enough. A current $2.8 billion market capitalization is just 1.4x the company’s guidance for revenue in 2024, and less than 5x projected EBITDA (earnings before interest, taxes, depreciation and amortization). Even actual numbers that come in below those targets can still deliver healthy gains over the next three to four years.
And over the long haul, Hyliion can and likely will become a straight EV company. It’s just not ready to do so yet. That’s in large part due to the fact that the trucking industry isn’t ready. We don’t have the batteries or the charging infrastructure to electrify our nation’s fleet yet.
Over time (and perhaps with some government help), that will change. If Hyliion can succeed with its hybrid efforts, it will be perfectly positioned to meet that incremental demand once it arrives.
All this will take time. Investors will need patience. But over the long haul, I still believe HYLN stock will be worth the wait.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.
