When the SPAC Tortoise Acquisition decided to merge with the heavy-duty electric powertrain firm Hyliion (NYSE:HYLN) – creating HYLN stock – in October of last year, the market for electric and alternative energy vehicle companies was reaching its peak.
The whole market for electric vehicles (EVs), zero emission vehicles (ZEVs) and SPACs was reaching a fever pitch.
But during the frenzy, which is still happening since many of these SPACs are now publicly traded companies, it’s important to gain some perspective.
Did you know that 100 years ago the first electric car made its debut? The Automatic Electric Transmission Company of Buffalo, New York, released its Automatic Electric. It sold for $1,200 and had a range of 60 miles.
Also, around this time, there were nearly 60 car makers in the U.S.
The New Era, Just Like the Old Era
There’s no use saying, “it’s different this time around,” since that usually dooms the person saying it to a shocking comeuppance.
The point is these booms and busts have historical precedents. And while history may not repeat itself, it certainly echoes.
There a plenty of new car companies being launched now, and that’s a very good thing. It means competition and a real exchange of ideas in the marketplace. Huzzah!
Many critics of the current major car companies complain that they have lost their edge and no longer are interested in innovation as much as quarterly profits. But investors also have to take some responsibility for that. And now that money is moving to new alternatives, big car companies are finally shuffling in that direction.
Granted, people that buy HYLN stock aren’t the same investors looking to buy Toyota (NYSE:TM) stock. They’re not in it for steady, single-digit growth and a dependable dividends. HYLN stock investors are buying into an adventure and a dream, as are all the other SPAC-funded EVs and ZEVs investors out there. It’s the difference between buying a commuter car and a race car – risks and rewards.
Hyliion Is Here Already
The one thing HYLN stock has going for it is the fact that the company already makes a product that’s in the market.
Launched in 2015, the company makes electric powertrains for tractor trailer trucks and other Class 8 commercial vehicles (trucks weighing more than 33,000 pounds). Its powertrains can be retrofitted to diesel trucks, so it has a market that isn’t dependent upon an entirely new type of vehicle to get revenue.
The company did about $1 million in revenue in 2020, but expects that to hit $344 million in 2022, and $1 billion in 2023. It already has 1,000 customers that are interested in converting their current rigs over to HYLN powertrains.
Is It Enough?
Some critics say that essentially developing a hybrid system for Class 8 vehicles isn’t the kind of investment that’s worth it. That straddling the fence isn’t a winning concept.
However, all-electric machines have their challenges as well. And until that technology improves, HYLN stock has an existing market.
Also, when that EV or ZEV market matures, HYLN is going to get a significant amount of that business.
If powertrains aren’t sexy enough for you, HYLN has also designed Hypertruck ERX, an natural gas-powered semi-truck with regenerative braking, and a natural gas fueled as well as an electric motor.
The point is, there’s a real business here beyond just a cool new car or truck.
Is HYLN Stock Worth It?
The biggest hurdle is how much you want to pay for this. There’s revenue, but nothing worth its $1.9 billion market cap. And its projected numbers sound great, but how solid are they?
The good news: You’re not buying a pig in a poke like you are for many of these SPAC-driven EV and ZEV companies. It has real potential.
The bad news: Even after its big drop back to current levels, HYLN stock still may expensive for all the risk, which may limit its ability to reach its potential before investors move on to the next fad.
Bottom line: It’s worth some risk capital now, but keep some in reserve in case you can average down in coming quarters, or until it has more earnings numbers under its belt.
Disclosure: On the date of publication, GS Early has no position in the stocks featured in this article. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article.