Edward Jones started Tesla at Hold as it sees leadership balanced by competition
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.
LEADERSHIP BALANCED BY COMPETITION: Edward Jones analyst Jeff Windau initiated coverage of Tesla (TSLA) with a Hold rating this week. The analyst sees the company being the "market leader" in electric vehicles with future opportunities in software for autonomous driving, battery energy storage and car insurance, but sees this position being balanced by rising competition in EVs, its high capital needs and its "elevated valuation."
On Monday, Bank of America analyst John Murphy raised the firm's price target on Tesla to a Street-high $900 from $500. The analyst, who kept a Neutral rating on Tesla shares, said the stock is "driven by growth afforded by valuation." Building automotive industry capacity is expensive and often generates low returns, but "the higher the upward spiral of Tesla's stock goes, the cheaper capital becomes to fund growth, which is then rewarded by investors with a higher stock price," Murphy argued.
NEW SEDAN, NVIDIA PARTNERSHIP: NIO Inc. (NIO) was in the spotlight earlier this week after unveiling a new luxury sedan called ET7 and a big volume battery pack. The company also announced a partnership with Nvidia (NVDA) to develop its new generation of automated driving EV. Following the announcements, JPMorgan and Bank of America raised their price targets on the shares to $75 and $70, respectively, with the former saying that NIO should continue to trade more like a "fast-growth" technology/EV stock than a carmaker.
Meanwhile, Citi analyst Jeff Chung downgraded NIO Inc. to Neutral from Buy with a price target of $68.30, up from $46.40. The ET7 is "good but not enough to make any critical changes from Tesla's challenge," said Chung, who estimates that ET7 will only register limited incremental sales of 3,000 to 4,000 units per month from the first quarter of 2022, when it is planned to be available. The ET7 may also be challenged by a future facelift of Tesla's Model S, while a Model Y price cut should create head-to-head competition with NIO's EC6, the analyst added.
LORDSTOWN ENDURANCE PRE-ORDERS: Lordstown Motors (RIDE) announced this week that it has received more than 100,000 non-binding production reservations from commercial fleets for its Lordstown Endurance all-electric pickup truck, with an average order size of nearly 600 vehicles per fleet. The Lordstown Endurance is a full-size, all-electric pickup that has a range of 250 miles, the equivalent of 600hp and can tow up to 7,500lbs. After successful prototype and Alpha builds, Lordstown is now building the first Beta Endurance vehicles and is on track for start of production in September of this year. The initial Endurance is a crew cab configuration with medium bed length, priced at $45,000 after federal rebate.
HYDROGEN VENTURE PACT: Shares of Plug Power (PLUG) were on the rise on Tuesday after the company and Renault (RNSDF) announced the signature of a Memorandum Of Understanding to launch a 50-50 joint-venture focused on vehicle systems based on hydrogen fuel cells.
Commenting on the announcement, Roth Capital analyst Craig Irwin called the JV with Renault "transformational" and said he sees Plug entering the venture from a position of strength by contributing the key hydrogen technology. Financial commitments remain undefined at this point, but the analyst understands the partners will use an existing Renault Group facility for R&D and production to accelerate startup and contain near-term costs. Platform development also benefits from Renault's success in EV markets, where the company sold around 100,000 EVs in 2020, he added.
Irwin also acknowledged that the revenue potential here is greater than his first take, as the JV includes the whole vehicle plus the refueling infrastructure and fuel. The analyst maintained a Buy rating on Plug's shares but suspended his price target on the stock given a wide potential range for the longer-term financial trajectory.
Meanwhile, Truist analyst Tristan Richardson initiated coverage of Plug Power with a Buy rating and $60 price target. In a research note to investors published January 12, Richardson pointed out that Plug Power enjoyed "exceptional" performance in 2020. While it's unlikely the shares repeat this move in 2021, he sees Plug Power converting "hydrogen hype" into concrete orders and profitability over the next three years, driving further outperformance.
SELL FUELCELL: Noting that hydrogen pure-play stocks have outperformed the S&P 500 "massively," year-over-year and in 2021 year-to-date, JPMorgan analyst Paul Coster downgraded FuelCell Energy (FCEL) to Underweight from Neutral with an unchanged price target of $10. FuelCell's solid oxide fuel cell solutions could take even longer to commercialize, but the company also has a "strong backlog" and strengthened balance sheet with which to execute on the current portfolio of SureSource solutions, Coster told investors in a research note. The analyst, however, thinks the stock is "richly valued here," citing valuation for the downgrade to Underweight.
JPMorgan's Coster also initiated coverage of Plug Power with a Neutral rating and $60 price target. The analyst views the company as "best in class" of the hydrogen/fuel cell space at present, but believes its "valuation is a challenge." Nonetheless, Coster pointed out that leveraging first-mover scale in PEM technology, the pace at which Plug Power is mobilizing is "breathtaking." The recent partnerships with SK Group and Renault substantiate the company's opportunities in Europe and APAC and give him confidence in the 2024 targets of $1.2B sales, and $250M in adjusted EBITDA, the analyst contended.
GROWTH IN RESIDENTIAL SOLAR: Truist analyst Tristan Richardson initiated coverage of Enphase Energy (ENPH) with a Buy rating and $254 price target. Richardson likes Enphase's long-term fundamental outlook on growth in residential solar, its core target market for its microinverter solutions. The analyst sees about 20% annual growth in both 2021 and 2022 in the U.S. market,which should allow Enphase to continue to sustainably grow its residential business on market expansion alone.
Richardson also started SolarEdge (SEDG) with a Buy rating and $435 price target. While SolarEdge has notably lagged the other primary distributed solar players, the analyst views the hurdles as transitory and longer term sees SolarEdge trading nearer to peers given a wide opportunity set. He has a favorable view of SolarEdge's long-term fundamental prospects as the company has comfortable market share in the U.S. but enjoys a strong international distributed solar opportunity set.
Lastly, Richardson initiated coverage of SunPower (SPWR) with a Hold rating and $31 price target. The analyst believes SunPower's outperformance in 2020 is a result of several separate but intertwined themes all accelerating in 2020, including the U.S. policy outlook, better than expected demand response to COVID and a broad industry "game-changing" rollout by the solar space of a scalable storage product. Through its significant transformation, Richardson views SunPower as favorably positioned in this growth market and can augment installation growth with its storage solution, driving topline growth in excess of the industry.
BUY LUMINAR: R.F. Lafferty analyst Jaime Perez initiated coverage of Luminar (LAZR) with a Buy rating and $38 price target. The analyst highlighted that the company has two main LIDAR product offerings - Hydra LIDAR sensors designed for commercial trucks and Iris LIDAR designed for the passenger vehicle market - and leading auto manufacturers, including Volvo (VLVLY) and Daimler (DDAIF), will start offering Luminar's LIDAR technology in their production vehicles in 2022.
'REMAINS LEADING SUPPLIER OF LIDAR TECH': Benchmark analyst Ruben Roy initiated coverage of Velodyne Lidar (VLDR) with a Buy rating and $32 price target, noting that the company was the first commercial supplier of lidar sensors in 2007 and "remains the leading supplier of lidar technology" today with an "expansive customer list." He expects Velodyne to optimize its production process over the next few years and continue to broaden its product portfolio as demand for autonomous machines continues to grow.