Lightning eMotors (NYSE:ZEV) stock is a strong long-term play for investors seeking relatively unknown electric vehicle companies.
The Colorado company produces electric fleet, medium- and heavy-duty vehicles including delivery trucks, shuttle buses, passenger vans, chassis-cab models and city transit buses.
It retrofits Ford (NYSE:F) and General Motors (NYSE:GM) vehicles as well as transit bus models with electric drivetrains. This reduces fleet costs which would otherwise be spent on new, fully electric vehicles.
The easiest way to understand the opportunity presented by Lightning eMotors is to start at the company’s recent earnings report, and then we’ll look at the massive deals it has signed as well.
ZEV Stock Has Huge Potential
Investors looking quickly at Lightning eMotors’ Aug. 16 earnings report might not see a potentially massive company at first blush. The company reported $5.9 million in Q2 revenues, which was a 509% increase on a year-over-year basis.
Lightening eMotors sold 37 zero-emission vehicles and powertrain systems in the period. Investors might logically conclude that stocks like Nio (NYSE:NIO), which cost 3-4x more than ZEV stock make more sense given it sold nearly 600X more vehicles in the same period. That’s an apples to oranges comparison, but still one investors might make.
Further, investors might shun Lightning eMotors because it posted a net loss of $46.1 million in the quarter, up from the $2.8 million loss a year prior. Few would blame investors for looking the company over in favor of other opportunities.
But that could be a huge mistake for several reasons. One of which is the company’s massive backlog and thus huge revenues to come.
Demand Backlog
As reported in its recent earnings release: “As of June 30, 2021, the Company had an order backlog including full vehicle powertrain system conversions, powertrain systems to be sold directly to customers, and charging systems of approximately 1,600 units valued at $168.4 million, up 508% and 502%, respectively, from the prior year period.
The company also states that its sales pipeline exceeds the $1 billion threshold, at $1.290 billion.
There is, as you may suspect, a rub here. Firstly, it’s risky to rely on projections of future revenue as opposed to actual results. Secondly, the company notes that Covid-related delays in chassis production have caused it to withdraw prior guidance.
Now the company anticipates between $4 to $6 million in revenues in Q3 and between 28 to 40 vehicle sales. That indicates that while there’s massive potential, the company will remain flat on a revenue basis in Q3 at best.
Even so, there are bigger factors that have six of seven current analysts with coverage of ZEV stock rating it a buy.
Buffett/Berkshire Backing
Lightning eMotors signed a deal on Aug. 10 that fundamentally alters its trajectory. It inked an $850 million deal with Berkshire Hathaway (NYSE:BRK.B) company Forest River to deliver 7,500 vehicles in the U.S. and Canada by 2025.
Forest River is the largest shuttle bus manufacturer in North America. It is the most meaningful deal in the history of the company and alleviates current concerns investors have to a degree.
“This has the potential to be the largest contract ever in the electric shuttle bus market, and we believe it will be the catalyst for other large commercial vehicle OEMs and fleets to accelerate their adoption of commercial electric vehicles,” said Lightning eMotors Lightning eMotors CEO Tim Reeser notes that:
Verdict
ZEV stock looks nearly certain to rise over the long term. It simply has to fulfill its contract obligations now. Those obligations might be unnecessarily complicated due to covid supply chain constraints, but they’ll be fulfilled.
Forest River and its conservative minders in Berkshire Hathaway certainly wouldn’t have awarded it such a contract if there was any doubt. Don’t expect ZEV stock to skyrocket overnight, but the future is bright.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”
