Despite the recent selloff in electric vehicle (EV) stocks, now is not the time to bail from this high growth area. Plus, with dark horses like Hyliion Holdings (NYSE:HYLN) stock down 33.5% in the last month, now is the right time to get these names in your portfolio. Although it does not get as much attention as some of the heavy hitters like NIO (NYSE:NIO) and Tesla (NASDAQ:TSLA), HYLN stock offers an interesting middle-of-the-way path to invest your capital.
And he timing cannot be better. On Oct. 2, Hyliion debuted on the NYSE under the ticker “HYLN” after a merger with a SPAC, or special purpose acquisition company, known as Tortoise Acquisition Corp.
Founded in 2015, Hyliion produces hybrid and fully electric powertrain solutions for Class 8 commercial vehicles. The electrified powertrain solutions provider is forecasting revenue of $344 million in 2022, $1.019 billion in 2023 and $2.091 billion in 2024.
That kind of growth is nothing to scoff at.
Yet, valuing a stock like HYLN is a double-edged sword. It certainly has a lot of positive catalysts, as do several EV SPAC stocks. The issue is where to place them when things are still sketchy regarding their future.
But I would still buy HYLN stock because of its products. Nikola (NASDAQ:NKLA) and Tesla are building their own line of trucks. Meanwhile, Hyliion is offering hybrid solutions that can retrofit its technology on existing fleets.
HYLN Stock Is Trading Like a Conventional SPAC Play
There is still a lot of charging infrastructure to be built. Hence, the future of the EV industry is not set in stone. Therefore, I lean toward HYLN stock as a neutral investment.
But why is HYLN stock down?
Well, it has a lot to do with the typical SPAC boom-and-bust cycle. Typically priced at around $10, HYLN stock started to shoot when it announced a merger with Tortoise Acquisition. Eventually, Hyliion reached a staggering 52-week high of $58.66 on Sept. 2.
Once the merger closed and the ticker started trading, shares cooled off. As I write this, the stock is trading at less than $9 a pop, an excellent bargain and unsurprising if you consider the cycle of a typical SPAC stock.
You have to remember that there are a lot of positive catalysts for the company. The powertrain systems for both hybrid and fully electric trucks take advantage of existing infrastructure for compressed natural gas, giving it an already established market to exploit.
An Enticing Prospect
Hyliion’s hybrid system can be installed on most major Class 8 commercial vehicles. When using the Hypertruck ERX system, you can select your fuel of choice, either natural gas or hydrogen. The generator will convert this fuel to electricity to power the truck, improving cost and efficiency.
Much like its other offerings, the Hypertruck ERX system comes equipped with data analytics software. It provides the company with an excellent source of recurring cash flow. In an Oct. 2 interview, CEO Thomas Healy said, “One of the real value adds is, how do you drive better efficiency by leveraging data and analytics off the vehicle as opposed to just having an electric system?”
“We’re constantly sending that information up to the cloud and monitoring the vehicle in real time. And then we’re able to supply that directly to the fleets,” he added.
By its own estimates, there are eight million trucks in operation, with 944,000 trucks sold annually. That’s a replacement opportunity worth roughly $800 billion. Managing to capture just 5% of the market will lead to a substantial return on your investment.
President Joe Biden is prioritizing a national EV charging network. But it will take a lot of time and effort to get the infrastructure built. Consulting firm AlixPartners believes you will have to spend $300 billion to build a global charging network to support EV growth by 2030, with $50 billion needed for the U.S. alone.
A hybrid option will therefore do very well in the current environment.
Worth a Look After the Selloff
HYLN stock offers an attractive entry position after retail traders have booked their profits and are now looking elsewhere.
There is always an element of risk when you put your capital in any EV company. Nevertheless, there is enough here to convince me that this company is worth a small position in your portfolio.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.