On February 11, 2021, Hyliion (NYSE:HYLN) stock closed at $20.78 per share. On April 9, it closed at $10.72 nearly 50% lower.
Should this be a cause for concern if you own shares of HYLN stock? I’m thinking it’s not. This looks like a case of a stock that rose too high, too fast and has now dropped too low, too fast.
That’s the nature of speculative investments. Hyliion was one of many electric vehicle (EV) companies that went public in 2020. And the fact that it went public via a special purpose acquisition company (SPAC) merger only adds more fuel to the fire.
The thing is, the long-term narrative for EVs hasn’t changed. Unlike many of the newly public companies, Hyliion has a product that’s generating revenue right now.
But investor expectations are changing. There are simply too many boxes that EV makers need to check. I’s not that the checklist won’t get complete, but that the belief we all would be driving EVs by 2024 has changed.
HYLN Stock: A Solution for Today
This works in Hyliion’s favor. In fact, it’s kind of a best-case scenario for the company’s V1 Hybrid aftermarket solution.
Hyliion’s electric powertrain is a retrofit solution for existing Class 7/8 trucks. Unlike other companies that went public in the EV space, Hyliion already has this product on the market in fleets with more than 30,000 trucks using the system. This novel electric powertrain logged more than two million real-world miles in 2020.
The V1 Hybrid uses the company’s proprietary technology and offers an agnostic approach to fueling. That is, it works with diesel, compressed natural gas (CNS), or hydrogen-fueled trucks.
Building on the popularity of SaaS business models, Hyliion has plans to offer its software and predictive data analytics products as a subscription model. Doing so would help companies spot patterns and identify failures for optimized performance with reduced downtime.
A Solution for Tomorrow
Hyliion is also working on its own all-electric truck, the Hyliion Hypertruck ERX. Customer trials are scheduled for some time this year. Its launch partner, Agility Logistics USA, has pre-ordered 1,000 trucks. Early indications suggest that the ERX may have some advantages over Tesla (NASDAQ:TSLA) including in the areas of payload capacity (53,000 vs. 43,000) and in the time to refuel/charge (10 minutes vs. more than 30 minutes).
The ERX will feature Hyliion’s proprietary patents and technologies. However, to manufacture the ERX, Hyliion will continue to use its “asset-light” model that relies on its partnerships with original equipment manufacturers (OEMs). Is that good or bad? For now, it’s simply a cost-effective approach that may serve Hyliion very well.
HYLN stock got a bullish bump in early April when an “Innovation Council” of industry leaders announced their support for the Hypertruck ERX. The council, which represents over 100,000 Class 8 commercial trucks will work with Hyliion to give Hyliion key user insights.
For all the encouraging news there is one yellow, if not red, light flashing. My fellow contributor Chris MacDonald reminded readers that a pre-order is not an order, and Hyliion has yet to put a date on when they will begin to deliver on them.
If the company doesn’t provide some clarity around this subject by the time the company next reports earnings in late May, investors may lose interest.
HYLN Stock Looks Ripe for Speculation
As a relatively new publicly traded company, Hyliion has only four analysts rating the stock. The consensus “hold” rating comes with a price target of around $18 in the next 12 months.
However, in the push-and-pull between the bulls and the bears, the bears may still have the upper hand. Short interest in HYLN stock (about 10.5% as of this writing) remains about twice as much as institutional ownership (at 4.95%). That being said, institutional ownership was less than one-tenth of one percent at the beginning of the year.
When I first wrote about Hyliion, I suggested the stock would be more interesting at a price in the low teens. I repeated that argument in January. And so in the interest of consistency, I will say that Hyliion is worth a speculative bet. Nearing $10 per share, a speculative position in HYLN stock is warranted.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.