Multiple pundits who are bearish on Hyliion (NYSE:HYLN) stock seem to be convinced that the company will completely fail, causing its shares to ultimately plummet to nearly $0.
But I believe that these skeptics are ignoring several important points.
First, the electric truck and powertrain maker has made deals with several major companies. Second, many firms are facing major pressure from consumers to become more “green.”
Third, Congress looks poised to implement major subsidies for zero-emission vehicles, and fourth, Hyliion’s electric powertrain solution and its Hypertruck may be, in many ways, easier and cheaper than competing products.
Given these points, I believe that HYLN stock has a chance to perform much better than the bears anticipate.
Reason #1: Hyliion Has Made Multiple Deals
In June 2020, Agility, a major truck producer, preordered 1,000 of Hyliion’s upcoming Hypertruck ERxs, while American Natural Gas, a large natural gas supplier, reserved 250 of the vehicles.
Penske (NYSE:PAG), which leases trucks, has bought three of Hyliion’s electric powertrains, while supermarket chain Wegmans acquired two of them last year and indicated that it may obtain more of them in 2021. Canadian freight carrier C.A.T. Transport tested five of Hyllion’s powertrains last year.
Moreover, customers are happy. According to a December 2020 article published by CCJ, “C.A.T. Transport and Wegmans Food Store in New York report diesel-like performance from a bolt-on electric axle and power management analytics through the Hyliion Hybrid System.”
Reason#2: Pressure to Become Greener
In a blog published on Sept. 23, 2020, Wegmans proclaimed that it planned to reduce its carbon footprint.
In addition to Wegmans, Anheuser-Busch (NYSE:BUD), Ryder (NYSE:R), Penske, and major logistics companies Schneider National (NYSE:SNDR) and NFI Industries all joined Hyliion’s Hypertruck Innovation Council in April.
In all probability, these companies joined the council because their customers are demanding that they lower their carbon emissions and they are looking for viable ways to do so. Hyliion’s products seem like plausible solutions.
Indeed, companies that don’t take steps to become more environmentally friendly risk losing a tremendous amount of business over the longer term. As a result, I believe that HYLN stock bears who are certain that firms won’t pay more money for Hyllion’s solutions than less “green” alternatives are misguided.
Reason #3: Zero-Emission Vehicle Subsidies and HYLN Stock
Apparently, the company’s Hypertruck ERX vehicle qualifies for the federal Alternative Fuels Tax Credit, which was extended at the end of last year.
Although no one outside of the Washington Democrats’ inner circle knows exactly what provisions will be in the Democratic budget, I think it’s clear that the plan will meaningfully increase the incentives for net0-zero vehicles, including the Hypertruck ERX.
Reason #4: Hyliion’s Products
Wegmans stated that Hyliion’s electric powertrain product gave trucks much more power than those that used compressed natural gas only. If Wegmans is so enamored with the electric powertrain, many other companies may be happy to buy it as well.
The conventional compressed natural gas-powered trucks appear to have limited power and, unlike the Hypertruck, they are apparently not capable of attaining net-zero carbon emissions.
As a result, I believe that Seeking Alpha columnist Stephen Tobin may very well be wrong when he states that the Hypertruck “will not sell” because it is more difficult to maintain than trucks with natural gas or diesel engines and costs $90,000 more than trucks with those types of engines.
Meanwhile, a Class 6 battery-electric truck costs an estimated $64,600 more than a diesel truck, making them not too much cheaper than the Hypertruck. Battery-electric trucks also take much longer to charge and have much less range and power than the Hypertruck.
According to Tobin, Hyliion’s powertrain “adds $25,000 to the cost of a new diesel truck and might save more than that in reduced fuel costs over its seven-year life cycle.”
Conversely, as I noted previously, Class 6 battery-electric delivery trucks cost an estimated $64,600 more than a diesel truck, and a Nikola fuel-cell-powered truck will cost a great deal more than battery-electric trucks. Unfortunately, I was not able to discover the cost of CNG engines.
The Bottom Line on HYLN Stock
Many companies are looking for ways to become greener. Given the relatively low cost and high power of Hyliion’s electric powertrain, it might be a viable solution for many companies looking to accomplish that goal.
Indeed, the fact that multiple, large firms are already testing out the product suggests that they believe that it may be worthwhile for them.
The Hypertruck is roughly $25,000 more expensive than a battery-electric truck, but it also has a much longer range and can be charged much more quickly.
The fact that two companies have ordered over 1,200 of the vehicles, while multiple large firms have joined Hyliion’s council, suggests that the Hypertruck might be a viable solution for a meaningful number of firms.
Given these points and considering that Hyliion’s market capitalization has fallen to less than $1.4 billion, I think that speculative, risk-tolerant investors should consider taking a small, bullish position in the company.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.