Editor’s Note: This article was updated on April 19, 2021, to correct the CEO’s name.
It’s been a bloodbath in second-tier electric vehicle (EV) stocks lately. Leaders like Tesla (NASDAQ:TSLA) are still doing all right, but once you get past the big ones, there is carnage across the sector. Take Hyliion (NYSE:HYLN) stock, for example.
Hyliion peaked above $50 last year, marking a quintuple from the $10 opening price of its special purpose acquisition company (SPAC).
Now, however, Hyliion has given back all those gains and more. In fact, HYLN stock sunk to under $9, marking its all-time low. Some of that is natural, given the fall in EV SPAC stocks generally. However, Hyliion’s fall has been particularly abrupt.
Despite that, there’s actually still reason to have hope for HYLN stock. Here’s why.
A Hybrid EV Model
Hyliion has a core feature that makes it different from almost all other EV stocks. This is that the company is not a 100% electric solution. As CEO Thomas Healy explains it, the core problem for many EVs is range. The charging infrastructure just isn’t there yet in many cases for cross-country trips. That is particularly true on heavier vehicles such as trucks that need more energy.
Instead of waiting for better batteries or charging infrastructure to emerge, Hyliion has taken a different approach. It has built its units with natural gas generators on board. This allows the vehicle to run on electric energy and also have a reliable cheap backup to keep operating even without access to the electric grid nearby.
According to Neely, not only is this faster, it’s also cost-competitive with getting electricity from the grid directly.
Some purists will scoff at using natural gas to help power an electric vehicle. It’s not a 100% carbon-free solution. That said, in Hyliion’s defense, it’s far less taxing on the environment than burning gasoline. And most electricity is still generated from fossil fuels as is. Hyliion’s answer may not be the optimal long-term solution. However, it could prove extremely useful as a transition technology, especially in trucking.
Explaining the Dour Stock Performance
Investors certainly appreciated Hyliion’s potential last summer when the stock rocketed to $50. However, since then, we’ve seen an unrelenting 80% slump. What’s gone wrong?
Hyliion, like most EV SPACs, doesn’t have significant revenues yet. It’s also led by a CEO who is less than 30 years old. His perceived inexperience, along with the problems that have hit other start-up stage EV companies have folks worried. That’s understandable.
The company’s technology will ultimately make or break the company. Short sellers have gone after Hyliion. Last October, for example, Bonitas Research slammed HYLN stock, suggesting that its battery technology had been acquired on the cheap and that some of its customers hadn’t actually bought units. Those are valid concerns, to be sure. However, it pales in comparison to some of the accusations we’ve seen against other EV firms.
Regardless, it seems Hyliion does have some credible customers, including transportation companies and Wegmans Food Markets. Hyliion also already raised a great deal of cash and has relatively low operating overhead costs, so it has time to develop its business model.
HYLN Stock Verdict
Hyliion’s CEO was on CNBC’s Squawk Box earlier this month. Asked a direct question about the big decline in HYLN’s stock price, the CEO had a good answer. Instead of being highly promotional and/or blaming short sellers, Neely reframed to focus on Hyliion’s business. He noted how the company’s technology is progressing and said that it’s now on him and the management team to execute and turn this promise into real results.
That’s the sort of thing you want to see at this stage of the company’s evolution. The leader is taking responsibility, rather than blaming outside forces for market volatility.
It’s understandable why investors are skittish around EV stocks now. Given the deeply unfortunate developments at Nikola (NASDAQ:NKLA), Lordstown (NASDAQ:RIDE), Workhorse (NASDAQ:WKHS) and others, skepticism is warranted. But Neely seems to be guiding Hyliion in a reasonable direction. For now, at least, his company deserves the benefit of the doubt.
HYLN stock was aggressively valued at $50 last year. It’s not hard to see why shares retreated sharply. Back down here, below the $10 offering price, however, the odds now favor the bulls. If you’ve been looking to buy one of these EV stocks that has gotten killed in recent weeks, HYLN stock looks like a good choice.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.