Hyliion Holdings Is a Risky Long-Term Bet
Hyliion Holdings Corp (NYSE:HYLN) is an electric vehicle (EV) stock that’s different. Instead of cars, Hyliion is developing technology to electrify Class 8 trucks. This is a huge potential market. As a result, HYLN stock surged last fall, with the prospect of a government push to electrify commercial transportation fleets.
However, Hyliion’s technology relies on upgrading existing commercial trucks from other manufacturers. With those same truck makers working on their own EV solutions, that opens up a lot of risk.
After its latest drop, HYLN stock is now trading below the $8 level again. Considering that only a year ago, shares were going for over $33, is now the time to consider adding this commercial transport EV play to your portfolio? InvestorPlace contributor Chris Markoch recently made the case that Hyliion is starting to look so bad it’s good. I’m not sure I fully buy into that theory, but let’s parse through the available information.
On the Plus Side, the EV Commercial Truck Market Is Huge
President Joe Biden’s plan to achieve a zero-emission economy, including electrifying transportation was a huge boost to EV stocks last year. HYLN stock was no exception. Last September, that EV enthusiasm drove HYLN to a $50.35 close.
Hyliion’s focus on electrification of Class 8 trucks has several twists.
Class 8 trucks are the big rigs, the 18-wheelers ubiquitous on the nation’s highways. They are expensive to buy, expensive to operate and are heavy polluters. 2018 figures put the global transportation industry’s CO2 emissions for the year at 8.26 gigatons.
Electrifying big trucks is a win for the environment. It’s also a win for the companies that operate commercial trucking fleets. EVs will cut fuel costs and are less expensive to maintain. That makes for considerable growth opportunity in the electric truck market. A recent report pegs the global market for electric trucks at 69,567 units for 2021. The number is projected to grow to 1,413,694 units by 2030. That’s a CAGR of 39.7%.
HYLN Stock Value Proposition
Here’s where the Hyliion twist comes into play.
The company’s Hypertruck ERX platform is a hybrid. The truck’s powertrain is electrified, with an onboard generator that burns renewable natural gas (RNG). A truck equipped with Hypertruck ERX can travel for short distances on pure battery power, but it’s an in-between solution that stops short of full electrification. However, RNG is made from biowaste, making it carbon neutral. With over 700 RNG commercial RNG filling stations nationwide, it’s also a lot easier to come by than charging stations that can accommodate a Class 8 truck.
Hyliion is pushing the fact that Hypertruck ERX gets transportation companies to zero emissions faster, cheaper, without having to rely on a charging infrastructure that isn’t there yet. Fuel costs are said to be 35% lower than diesel. The company also promises a higher payload capacity than pure plug-in EV class 8 trucks.
The company also unveiled its eX bolt-on solution (due to ship later this year), an updated version of its hybrid powertrain, that provides easier installation, servicing and operation, leading to greater payloads and better driver experiences.
Sounds like a promising case for HYLN stock, right? Well, not quite.
Market Size Brings Competition
The report mentioned above on the rapid growth of the commercial EV trucking fleet sounds promising, but it also outlined danger for Hyliion:
“Factors such as rise in pollution and environmental hazards, stringent government regulations, and stiff competition have compelled automotive OEMs to make fuel-efficient and environment-friendly vehicles. In this pursuit, automotive OEMs and component manufacturers are exploring ways to develop and design trucks that can meet the standards of fuel efficiency as well as vehicle emission.”
Original equipment manufacturers (OEMs) are rapidly developing their own Class 8 EV trucks. These are established truck manufacturers that have dominated the industry for decades. In addition, leading EV car makers are also eying the market for EV transport trucks.
At this point, Hyliion has orders for Hypertruck ERX, but the platform is still in testing. And there is no “Hypertruck ERX” directly for sale. Instead, Hyliion needs to partner with Class 8 truck manufacturers to offer the Hypertruck ERX platform as an option. That carries significant risk, especially when these companies are working on their own EV plays.
Bottom Line on HYLN Stock
There aren’t a lot of investment analysts who cover HLYN stock. That in and of itself says something. The Wall Street Journal is tracks just five. They have HYLN rated as a consensus “Hold” with an average $12.80 price target.
If shares do manage to reach that average 12-month price target, they will still be under water compared to the $15.33 this stock closed at to start 2021. It’s also only a fraction of its $50.35 high close last September.
HYLN stock also rates a very poor “F” in Portfolio Grader.
In short, while Hyliion Holdings’ proposition as a zero-emissions upgrade for traditional commercial transport trucks makes it appealing, there’s nothing at this point that would lead me to recommend HYLN stock as a long-term growth investment.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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