Barclays expects EV enthusiasm to continue into 2021, Camping World partners with Lordstown Motors
Welcome to The Fly's latest edition of "Charged," where we look at some analysts' notes, news and activity in the electric vehicle and clean energy space.
MULTIPLE EV WINNERS: Deutsche Bank analyst Edison Yu initiated coverage of Xpeng (XPEV) with a Buy rating and $58 price target. The analyst believes his "Fab Four" thesis from September - where NIO (NIO), XPeng, Li Auto (LI) and WM Motor represented an emerging class of automakers backed by well capitalized tech titans and local governments looking to disrupt the auto industry - has been playing out. Along with Tesla (TSLA), these automakers are "increasingly destined to conquer" the Chinese auto market, Yu told investors in a research note published on December 14. The analyst expects "multiple winners" in the new electric vehicle "world order."
EV ENTHUSIASM TO CONTINUE: Barclays analyst Brian Johnson expects electric vehicle "enthusiasm" to continue into at least the first half of 2021 as the new Biden administration likely pursues a more aggressive CO2 regulatory approach. As such, Johnson is rotating his stock picks more toward electric vehicle accretive and powertrain neutral names. Tesla is pulling up valuations of pure-play electric vehicle names, leaving "powertrain agnostic" names "relatively unscathed" while depressing the multiple of internal combustion engine dependent suppliers and manufacturers, Johnson said.
The analyst upgraded Lear (LEA) to Overweight from Equal Weight with a $190 price target. Additionally, he raised his price target on Tesla to $230 from $125, while keeping an Underweight rating on the shares. With over $12B of capital raised this year, Tesla has the ability to ramp production and use price to sell cars, Johnson contended, adding that he increased production and sales estimates. However, the analyst does not forecast the inflection in earnings "that at least some bulls hope for."
CAMPING WORLD, LORDSTOWN PARTNERSHIP: Earlier this week, Camping World (CWH) and Lordstown Motors (RIDE) announced the formation of a relationship to create a national electric vehicle service and collision network for Lordstown Motors vehicles, beginning with the Lordstown Endurance, which was called "the world's first full-size, all-electric pickup truck." Additionally, the two companies are exploring the development of new EV products and solutions for the RV marketplace based on the Endurance platform, including a lithium-ion battery pack for travel trailers that would replace conventional gasoline onboard generators, the "first, all electric, high volume production RV" and installation of a Good Sam charging network at Camping World locations.
Following the announcement, JPMorgan analyst Ryan Brinkman reiterated an Overweight rating on Camping World shares with a $45 price target. The analyst believes the deal creates additional opportunities for Camping World to grow sales and profits over time apart from the cyclicality of the new recreational vehicle sales cycle. Further, Brinkman thinks the collaboration adds to Camping World's "multiple other avenues to grow profits."
HOUSE-BUILT LIDAR SENSORS: Shares of Luminar (LAZR) were under pressure on Tuesday after Amnon Shashua, CEO of Mobileye and a senior vice president at Intel (INTC), shared plans with Reuters for a self-driving car system targeted for 2025 that could use house-built LiDAR sensors rather than units from Luminar Technologies that cost a "few thousand" dollars. Mobileye, which has deals to supply its current camera-based driver assistance systems to BMW (BAMXY), Volkswagen (VWAGY) and Nissan Motor (NSANY), plans to augment its cameras with LiDAR and radar sensors, Reuters' Stephen Nellis reported.
Following the news report, Andrew Left's Citron Research said in a tweet that Luminar shares have "a long way down" with "Mobileye now in the LIDAR game." "Citron warned about $LAZR at $40 just last week. With Mobileye now in the LIDAR game $LAZR even at $27 gives it a $9 bil valuation on $15 mil in revs this year.....a long way down still in this SPAC mania," the tweet reads.
The following day, Luminar and Mobileye clarified details of the deal they announced on November 20 following nearly two years of working together at the development stage. Luminar is providing its technology to Mobileye for its Autonomous Vehicle Series solution. Luminar's technology will be used to enable Mobileye's TRUE REDUNDANCY capability, with multiple self-contained sensor systems to "enable uncompromised safety and validation for level 4 autonomous driving," they stated.
Meanwhile, Northland analyst Gus Richard upgraded Luminar to Outperform from Market Perform with an unchanged price target of $41 following the pullback in the stock that was driven by the Reuters article that noted Mobileye's CEO thinks his company could use in house LiDAR for its autonomous car systems by 2025. The analyst sees this as unlikely as he does not believe an internal LiDAR system could be ready for 2025 production and if Mobileye had an internal solution ready to go they would not have announced a deal with Luminar.
'FIRST MOVER ADVANTAGE': Needham analyst Rajvindra Gill initiated coverage of Velodyne Lidar (VLDR) with a Buy rating and $30 price target. The analyst is positive on the company's "clear first mover advantage" in the light direction and ranging, or LiDAR, category, which he sees as a "critical technology" for advanced driver assistance systems, or ADAS, autonomous vehicles, and non-automotive applications. Gill added that by 2024, he forecasts that 60% of ADAS vehicles will have LiDAR, as the cost declines to less than $600.
CHEAP POWER TO MAKE HYDROGEN: Nikola (NKLA) plans to enter into an agreement with an Arizona utility to supply cheap electricity it needs to produce hydrogen for a planned fueling network, Bloomberg's Edward Ludlow and Mark Chediak reported. The proposed contract between Nikola and Arizona Public Service, a unit of Pinnacle West Capital (PNW), was disclosed in a Dec. 11 filing requesting approval from Arizona utility regulators, the authors noted.
Meanwhile, Evercore ISI analyst Chris McNally initiated coverage of Nikola with an In Line rating and $20 price target. The analyst noted that in the months since the SPAC announcement, the company has been put "through the proverbial ringer" and is far from a "clean" story, but he is cautiously optimistic that Nikola's hydrogen ambitions can offer a unique proposition to customers and investors.
SOLAR TAX CREDIT EXTENSION: The Washington Examiner reported that a bipartisan energy package could be attached to an omnibus spending bill that could soon be introduced, Roth Capital analyst Philip Shen told investors in a research note this week. The analyst added that tt appears there is potential for a one-year production tax credit and investment tax credit extension, which would represent an "upside surprise" for the solar market.
Shen's checks suggest the expectation is for an investment tax credit extension at 26% with a 22% extension less likely. The analyst believes the impacts of a refundability feature along with an ITC extension "could be meaningful upside" to solar demand in the U.S. Overall, Shen sees the news as a positive for nearly every stock in his coverage universe with U.S. exposure, including Array Technologies (ARRY), First Solar (FSLR), Daqo New Energy (DQ), Canadian Solar (CSIQ), JinkoSolar (JKS), Enphase Energy (ENPH), SolarEdge (SEDG), Generac (GNRC), Sunnova Energy (NOVA), Sunrun (RUN), SunPower (SPWR), ReneSola (SOL), Sunworks (SUNW), Broadwind (BWEN), TPI Composites (TPIC) and Hannon Armstrong (HASI).