Since November, electric vehicle stocks have been hot. It’s not hard to see why.
After all, there’s a lot of good news for the sector. Electric vehicle leader Tesla (NASDAQ:TSLA) has been joined in the EV race by nearly every internal combustion engine (ICE) manufacturer in the world.
President Joe Biden’s infrastructure plan includes heavy funding for EV charging, though that part of the effort will face potential roadblocks in Congress. Myriad state and local governments have their own strategies for increasing electric vehicle adoption.
The one concern for electric vehicle stocks is whether they’ve become too hot. Valuations for the group reached stratospheric levels earlier this year. But a pullback in many EV charging names has brought valuations in.
All told, there’s plenty of reason for optimism. That’s particularly true for these four electric vehicle stocks:
- ChargePoint (NYSE:CHPT)
- TPG Pace Beneficial Finance (NYSE:TPGY)
- Climate Change Crisis Real Impact I Acquisition (NYSE:CLII)
- Nuvve Corporation (NASDAQ:NVVE)
Electric Vehicle Stocks: ChargePoint (CHPT)
CHPT stock desperately needed a pullback. From November levels, shares more than tripled based on essentially zero company-specific news, but rather the optimism toward EV charging plays and the entire EV industry.
That pullback has arrived, and now CHPT stock looks interesting. The stock certainly isn’t cheap, and it still has a market capitalization above $7 billion. That’s roughly 50x revenue for 2020.
But ChargePoint does look like the early leader among electric vehicle charging stocks. And as the company itself has noted, that creates a simple bull thesis.
As EV adoption rises, so does the need for EV charging stations. And so, as ChargePoint put it, its growth is “directly proportional to EV penetration.” It doesn’t matter who makes the vehicles; as long as ChargePoint can hold its market share lead, it wins.
Again, CHPT stock is expensive. But there really aren’t any ‘cheap’ plays in the entire space. And other valuations look more concerning. Blink Charging (NASDAQ:BLNK), for instance, trades at nearly 300x its 2020 revenue of just $6.2 million.
Getting the early leader at a better, if not spectacular price, seems like the better option.
TPG Pace Beneficial Finance (TPGY)
TPG Pace Beneficial Finance is one of several SPACs (special purpose acquisition companies) that will become electric vehicle charging stocks. The SPAC is merging with EVBox, the market share leader in Europe.
The case for TPGY is similar to that of ChargePoint (itself the result of a SPAC merger). EVBox leads in market share in Europe. It, too, is an agnostic play on EV growth in a market where subsidies are growing.
But TPGY could be an even stronger play. Valuation relative to 2021 forecasts is far less onerous: pro forma for the merger, EVBox now is valued at less than 20x this year’s revenue. Both ChargePoint and EVBox are moving into each other’s markets, but the complex nature of European regulations (which vary by country) could give EVBox an edge in new territory.
Indeed, I thought TPGY was an attractive play back in February, with the stock around $25. It’s now below $20, making it one of the more intriguing EV charging plays out there.
Climate Change Crisis Real Impact I Acquisition (CLII)
CLII is merging with EVgo, a developer of so-called “fast-charging” stations. Even by the standards of the sector, it’s a high-risk, high-reward play.
EVgo simply doesn’t have much of a business at the moment. 2020 revenue is estimated to be just $14 million. There is a deal with General Motors (NYSE:GM), and the company projects over $1 billion in revenue by 2027. But the GM deal hasn’t moved the needle yet, and every EV charging play is projecting exponential growth this decade. At least a few will fall short.
So, this largely is a bet on the EVgo technology, that its faster stations simply outcompete those of companies with larger initial market share. Near $20 in February, I was skeptical that was a bet worth taking. After pulling back to $14, CLII stock does look more intriguing, but remains suitable only for a “go big or go home” portion of an investor’s portfolio.
Nuvve Corporation (NVVE)
The same is true for NVVE stock. The company has developed vehicle-to-grid technology that allows EVs to contribute power to the grid as well as consume it. That technology could lower cost of ownership and help stabilize the grid itself.
Of course, like all new technologies, adoption is the key. Nuvve’s business is a blip in the market at the moment, with 2020 revenue estimated around $5 million to $6 million. The sheer number of partners required in so many geographies makes growth tougher.
Nuvve’s own SPAC merger did provide it with plenty of cash to build its business. And the technology certainly is intriguing. If Nuvve becomes a big part of electric vehicle infrastructure, the current share price near $11 will look in retrospect like a massive opportunity. But if the industry goes in a different direction, it’s not inconceivable that over time $11 turns into zero.
On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article.