Once a hot property, Hyliion Holdings (NYSE:HYLN) stock fell sharply when Tortoise Acquisition completed its reverse merger in September 2020.
Since the special purpose acquisition company (SPAC) merger ended, the new public company failed to attract investors.
Prospects in HYLN stock depended on trading momentum. With momentum traders moving to the next hot stock, Hyliion must earn its investor confidence by posting stronger quarterly results.
On Sept. 28, 2020, Tortoise Acquisition announced the approval of a business combination with Hyliion.
“Our strategy has been to combine with a company to take advantage of the global opportunities created by the energy transition including clean energy generation and storage, alternative fuels and transportation, technological advances, and changes in energy policies,” the company said in a statement at the time.
With the benefit of hindsight, investors may appreciate how much and how long it will take to run a sustainable business.
A Closer Look at HYLN Stock
The firm posted GAAP earnings per share loss of 13 cents. Sadly, it posted no revenue. For a company valued at nearly $2 billion, it is losing too much money. The cash it raised could evaporate sooner than investors realize.
In February, Hyliion introduced a next-generation battery module. Chief Executive Officer and founder, Thomas Healy, said that battery development represents a key milestone in the hybrid commercialization process. He said this further strengthens its technology platform as it innovates future solutions.
The astute investor will ask what Hyliion offers compared to Toyota (NYSE:TM) and its hybrid offering. Hyliion aims to offer a longer battery life of as much as five times more cycle life than a conventional electric vehicle battery. Its improved heat dissipation will improve the charge and discharge rates.
Furthermore, the fast-charging of under eight minutes is vastly better than any EV battery solutions on the market. Finally, the module design cuts operating temperatures. This would improve safety levels.
Investors may as well look into at QuantumScape (NYSE:QS) as well. QuantumScape promises impressive battery innovations in the years ahead, and, like Hyliion, will not have any revenue for a few years.
Innovation and Valuation
Hyliion’s hybrid system differentiates its product offering from the other EV companies.
Markets previously bet that Workhorse (NASDAQ:WKHS) would win a multi-billion dollar contract with the U.S. postal service to supply EV trucks.
Speculators thought Nikola (NASDAQ:NKLA) had an EV truck too, only to learn it only developed a prototype design.
Hyliion’s hybrid system stands out because it works on most major Class 8 commercial vehicles. This would help cut fuel use as well as greenhouse emissions.
On Wall Street, the average analyst’s price target as compiled by Tipranks is $11.50, albeit based on two analysts. Goldman Sachs issued a “sell” call, warning on a downside to $9.00.
The Bottom Line on HYLN
Unless something reignites frenzied buying for clean energy stocks, Hyliion is risky speculation. It needs unsuspecting buyers to lift the stock.
Hyliion expects no near-term profits and its cash burn will increase as research costs rise. To bring its product to the commercialization phase, Hyliion will need more capital. Another stock or debt sale will punish existing investors.
In the chart at the right, Hyliion scores the lowest on peer value score. Without a clear path to revenue, investors have no idea what they are paying for.
Even though it tumbled last month on the stock market, sentiment has yet to reverse. If the stock rallies, it may prove short-lived. Investors who bought the stock at higher prices should consider selling into any rally instead of holding on.
Stay away from Hyliion. The EV and clean energy euphoria ended a few months ago. Any uptrend will prove short-lived as Hylion posts recurring losses.
As more firms in this space fail, the sector will consolidate. Chances are high that Hylion will seek a buyer to replenish its cash on hand. By the time that happens, its stock price will languish to the downside.
Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.