Most electric vehicle (EV) stocks have performed well since last fall. But, not Hyliion (NYSE:HYLN) stock. When it completed its special purpose acquisition company (SPAC) merger last fall, the stock traded for around $40 per share. But, in the two months following the deal close, its share price fell considerably.
Since then, HYLN stock has traded sideways, between $15 and $20 per share.
Meanwhile, the “blue wave” election results fueled a tremendous rally for electric vehicle plays. Yet, while Hyliion failed to rally on possible green policy changes, it remains an interesting opportunity in the electric truck space.
The primary reason? Its valuation.
Relative to projection, HYLN stock looks reasonably priced at today’s levels. But, despite this, investors remain hung up on its hybrid-electric focus. Like I said previously, it’s stuck in the middle, and investors don’t like that.
However, its hybrid offerings may be a plus more than a negative. As we remain years away from when technology makes all-electric semi trucks viable, Hyliion’s solution may be one of the more realistic ones out there.
Add to that its potential to eventually offer a fully hydrogen-electric solution, and its clear there’s opportunity with this underrated EV play. It may take time for investors to finally appreciate HYLN stock. But, consider it a solid buy at today’s prices.
What’s Holding HYLN Stock Down?
Recently, EV stocks have pulled back. But, since the fall, they’ve vastly outperformed Hyliion stock. So why are investors skipping out on this name, but are willing to aggressively dive into other major plays in this sector?
We can likely attribute much of the hesitance toward its focus on hybrid rather than fully-electric offerings. Viewing hybrids as a stepping stone to an all-electric future, investors fear early-stage truck makers like this one won’t be able to compete once technology catches up. But, it’s a bit short-sided to avoid HYLN stock for this reason alone.
Why? Two reasons. First, we are still many years away from having all-electric semi trucks. Like I wrote back in December, this company’s hybrid solution is the most realistic approach to a green roadway. Competitors may tout they’ll have an all-electric solution ready just around the corner. But, like the saying goes, a bird in one hand is worth two in the bush.
And, with the technology and infrastructure in place, Hyliion has that bird in hand. Whether we are talking about its hybrid powertrain that can be retrofit into existing Class 8 semi trucks. Or, its flagship Hypertruck ERX, which uses a renewable natural gas (biofuel) generator for backup. Either way, this company has solutions that are viable today, rather than several years down the road.
In short, Hyliion’s prospects are much brighter than investors currently think. Once more people realize this, expect shares to take off. But, in the meantime, you can enter a position in HYLN stock at a more than reasonable valuation.
Hyliion Is Cheap Relative to Its Potential
It’s hard to value early stage EV stocks on current results. Instead, we have to rely on projections to determine whether they are solid opportunities. In some cases, some of these stocks are cheap based on this criteria. But, in other situations, today’s share price more than reflects future projected growth.
Fortunately with HYLN stock, it’s the former, not the latter. What do I mean? Based on numbers in its SPAC merger presentation, the company’s 2024 projections call for $2.1 billion in revenue, and $602 million in annual EBITDA.
Compare that to its current enterprise value ($1.98 billion), and you can see shares are cheap relative to potential. There’s plenty of room for Hyliion to climb if it can turn estimates into tangible results. Even if it falls slightly short of this projection, investors will have plenty of reason to bid this stock up well above its current price range.
Also, keep in mind its 2024 revenue projections aren’t some sort of unreasonable stretch goal. $2.1 billion represents just 2.2% of this company’s $94 billion total addressable market. Don’t expect growth for Hyliion to stall if it gets to that point.
Ultimately, there’s plenty of room for Hyliion to gain in the coming years. It can still jump from around $16 per share and move past its former highs of $58.66 per share … and beyond.
Consider This Possible Quiet Winner a Buy
Investors are missing the forest for the trees here with Hyliion. Sure, its current hybrid focus continues to weigh down the stock. But, it can easily pivot to all-electric once the technology and infrastructure catches up.
Other names in this space are overvalued. Even when you factor in their growth potential. But, that’s not the case with Hyliion. Shares are cheap based upon its 2024 projections. And, with more room for the business to grow from there, shares have ample runway to rally well beyond past highs in the coming years.
Bottom line: consider possible quiet winner HYLN stock a buy at today’s prices.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.
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