Hyliion Is Running Out of Time to Separate Itself From the EV Pack
Hyliion (NYSE:HYLN) continues to hover around its debut price of around $10. And for investors it must be starting to feel like Groundhog’s Day. It certainly does to me. Every time I’m asked to take a position on HYLN stock, I feel the same way. Except, like many analysts and investors and Bill Murray in the movie, each time I get a little more impatient.
For those unfamiliar with Hyliion, the company designs, develops, and sells electrified powertrain solutions for the commercial transportation industry (specifically Class 8 trucks). The company also offers customers a battery management system for hybrid and fully electric vehicle applications.
My InvestorPlace colleague Josh Enomoto recently described Hyliion as a transitional company. The description resonated with me because it’s been the aspect of Hyliion that has troubled me the most since I first learned of the company.
Although our carbon-free future is not here yet, it feels like this time really is different. At first glance that would seem to be a bullish argument for Hyliion. But as these other technologies get closer to reality, HYLN stock looks more and more like a poor choice.
More Than Chocolate and Vanilla
Simply put, HYLN stock is a poor choice because fleet operators think more attractive options are on the way.
Don’t get me wrong, optionality can be a very attractive investing premise. However, Hyliion would be more attractive to me if fleet operators had to make a choice between the company’s hybrid powertrain option or traditional fossil fuel trucks.
But with many more options in the pipeline, Hyliion’s solution looks like a patch, not a permanent solution.
This doesn’t mean that the United States isn’t pivoting towards all-electric and hydrogen vehicles. But that future isn’t here yet. A common theme that came up when I wrote about SPAC companies in 2020 was that the timelines didn’t add up. Most of these companies wouldn’t have production models until 2022 at the earliest and perhaps as late as 2025.
Measure Twice, Cut Once
Several of the leading integrated energy companies are projecting a net-zero future by 2050. If those projections give you a feeling of déjà vu, you’re getting my point.
Hear me out. Fleet operators are under pressure to convert their vehicles away from fossil fuels. However, this is an expensive undertaking. And that brings the phrase “measure twice, cut once” to mind. The Biden administration can persuade; they can even strong arm. But they can’t make fleet operators invest in technology that isn’t ready for primetime.
Companies want to make this investment one time. To these companies, 2023 may as well be next month. If they can wait 18 to 24 months to have a fleet of battery-powered electric trucks or even to have their fleets fueled by hydrogen, I suspect that they’ll take that option.
And that makes Hyliion a poor investment choice.
Expect More of the Same From HYLN Stock
If Hyliion didn’t have a product that’s being test marketed, the company would be easier to dismiss. It does, but demand seems to be coming in at a snail’s pace. And that’s causing many investors to lose their patience.
Some of this may not be the company’s fault. There’s simply a circular argument between the bulls and bears. The bulls say that Hyliion has a “both/and” approach that makes its growth path obvious. The bears counter with four words, “show me the money.” Right now Hyliion can’t and it seems it’s running out of time.
These debates are exhausting and pointless. But in the case of HYLN stock, they’re critical to many investors who may be holding the bag on their investment. The company says it will begin to realize revenue in the second half of 2021.
The good news is that’s coming up pretty quick. The bad news is… that’s coming up pretty quick.
If you don’t have a position in HYLN stock, there’s no compelling reason to jump in at this time. HYLN stock does not appear to be going anywhere soon.
On the date of publication, Chris Markoch 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.
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.
