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.
TESLA HALTS MODEL 3 LINE IN CA PLANT: Tesla (TSLA) told workers it will temporarily pause some production at its car-assembly plant in California for approximately two weeks, Bloomberg's Josh Eidelson reported, citing a person familiar with the matter. Workers on a Model 3 production line in Fremont were told their line would be down from Feb. 22 until March 7, said the person, who asked not to be identified because the information is private. The workers were told they would be paid for Feb. 22 and Feb. 23 and not paid for Feb. 28, March 1, 2 and 3. They were advised to take vacation time, if they had it, the report noted.
Commenting on the news, Wedbush analyst Daniel Ives said he believes the reported shutdown is more about chip shortages than being demand driven. The analyst, who said it appears improvement from a chip perspective is "on the horizon for Tesla and others" that have been impacted, such as General Motors (GM) and other automakers, thinks there is still some supply of Model 3's from the fourth quarter in the Fremont lot. He is not "overly concerned" that this supply chain and factory disruption changes the overall delivery trajectory for the first quarter and 2021, added Ives, who kept a Neutral rating and $950 price target on Tesla shares.
President Biden plans to address chip shortages by ordering a broad review of supply chains for critical materials from semiconductors to pharmaceuticals and rare-earth minerals, The Wall Street Journal's Alex Leary reported. "There isn't kind of a magic bullet to solve the near-term problem," a White House official who works on economic issues said in a briefing with reporters before Biden's action. Last week, a group of U.S. chip companies, including Intel (INTC), Qualcomm (QCOM), Micron (MU) and AMD (AMD), sent a letter to Biden to request "funding for incentives," while Apple (AAPL) supplier TSMC (TSM) is undertaking a major expansion as chip demand outstrips supply. Ford (F) recently said that it would cut production of the F-150 pickup truck because of the chip shortage, while General Motors (GM) has extended shutdowns at some North American plants into March.
BITCOIN INVESTMENT: Wedbush analyst Daniel Ives said on Monday that based on his calculations, he estimates that Tesla so far has made roughly $1B of profit over the last month from its Bitcoin investment given the skyrocketing price of Bitcoin, which now tops a trillion of market value. To put this in perspective, Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its EV cars in all of 2020, Ives contends. While the Bitcoin investment is a side show for Tesla, it's clearly been a "good initial investment" and a trend he expects could have a ripple impact for other public companies over the next 12-18 months. The analyst still expects less than 5% of public companies will head down this route until more regulatory goal posts are put in place around the crypto market, which is clearly starting to gain more mainstream adoption in 2021 and believes will have a seismic impact for blockchain, payments, banks, and semis in the years to come. Ives has a Neutral rating and a price target of $950 on the shares.
LUCID GOING PUBLIC VIA SPAC MERGER: Following weeks of speculation and media reports, Lucid Motors and Churchill Capital Corp IV (CCIV) have finally announced that they have entered into a definitive merger agreement. CCIV and Lucid are combining at a transaction equity value of $11.75B. The transaction values Lucid at an initial pro-forma equity value of approximately $24B at the PIPE offer price of $15.00 per share and will provide Lucid with approximately $4.4B in cash.
The news sent not only Churchill Capital Corp IV into negative territory on Tuesday but also shares of other higher-profile SPACs, including Bill Ackman's Pershing Square Tontine (PSTH), Foley Trasimene Acquisition II Corp. (BFT), FTAC Olympus Acquisition Corp. (FTOC), Reinvent Technology Partners (RTP), CIIG Merger Corp. (CIIC), Switchback Energy Acquisition Corp. (SBE), and Forum Merger III Corp. (FIII).
Meanwhile, Lucid Motors CEO Peter Rawlinson told Bloomberg in an interview that the decision to push back the production timeline for its debut electric vehicle came after Churchill Capital expressed concerns about the company's quality control and supply chain. Lucid plans to start producing its Air sedan in the second half of this year, a delay from its previous plan to start up in the second quarter. The postponement followed consultation with Churchill executives who saw a prototype vehicle, Rawlinson said.
USPS NGDV CONTRACT: Shares of Workhorse Group (WKHS) were under pressure earlier this week after the U.S. Postal Service, or USPS, announced on Tuesday afternoon that it has awarded Oshkosh Defense, a wholly owned subsidiary of Oshkosh (OSK), an indefinite delivery, indefinite quantity contract to produce the Next Generation Delivery Vehicle, or NGDV, "the USPS's first large-scale fleet procurement in three decades."
Meanwhile, Workhorse Group said that after being informed of the USPS decision, the company has requested, pursuant to the bid process rules, additional information from the USPS and is awaiting a response at this time. The company intends to explore all avenues that are available to non-awarded finalists in a government bidding process. "As further updates are provided, Workhorse intends to share that information through appropriate communications channels to the extent that the company is permitted to do so," it stated.
Following the news, Oppenheimer analyst Colin Rusch downgraded Workhorse Group to Perform from Outperform. As one of the three finalists and the only U.S.-made battery electric vehicle offering, Rusch expected Workhorse to get at least a portion of the contract. He noted, however, that Workhorse continues to have 8,000 vehicles in backlog representing $600M-plus in revenue along with the potential royalty stream from Lordstown Motors (RIDE).
Rusch pointed out that with Workhorse missing the U.S. Postal Service contract entirely and facing a "choppy supply chain situation" due to COVID-19-related headwinds, he prefers to step to the sidelines. Estimates need to move lower with USPS trucks coming out and the availability of battery packs remaining challenging, the analyst added. He also believes the company's convertible debt "could prove cumbersome," even with its maturity in 2024.
FISKER, FOXCONN TO COLLABORATE ON EV PROJECT: Fisker (FSR) announced it has entered into a MOU with Hon Hai Technology Group supporting a project to develop a "breakthrough" electric vehicle, codenamed "Project PEAR." Foxconn will manufacture the vehicle at projected annual volumes of more than 250,000. Start of production is projected for the fourth quarter of 2023. This will be the second vehicle introduced by the Fisker brand, following the launch of the Ocean SUV in the fourth quarter of 2022.
On Thursday after market close, Fisker reported on its fourth quarter losses and milestone acheivements as it progresses toward becoming a revenue-generating enterprise. Chairman and CEO Henrik Fisker said in part: "We are now in full execution mode on the FM29 platform and Ocean program, and our partnership with Magna International is strong. We are confident of an on-time start of production next year - Q4 2022 - at Magna Steyr's facilities in Europe and a systematic ramp up to full production in 2023."
On Friday morning, Morgan Stanley analyst Adam Jonas raised the firm's price target on Fisker to $40 from $27 and kept an Overweight rating on the shares as he made "material changes" to his forecasts to reflect the company's capex and opex guidance for fiscal year 2021 and made "a highly material change" to his medium term outlook following the MOU with Foxconn for a mass market, U.S.- made EV as announced on Wednesday. Jonas raised his 2025 volume forecast to 255,000 units from 225,000 given an earlier start of production for the company's second platform and he now forecasts 570,000 units for Fisker by 2030, versus his prior forecast of 419,000 units being produced annually by that time.
NIKOLA QUARTERLY REPORT: Nikola (NKLA), which like Fisker is an EV hopeful that is still in the development phase, reported Q4 adjusted losses on Thursday evening that were not as steep as the consensus forecast. Mark Russell, Nikola's CEO, said that, "In the fourth quarter of 2020, Nikola made the necessary changes to refocus and realign the company. You have seen us restructure our agreement with GM, cancel our battery electric refuse truck program, discontinue our Powersports program and realign the company's resources with laser focus on our core businesses: battery electric and hydrogen fuel-cell electric heavy-duty trucks, and hydrogen refueling infrastructure." Nikola added that "now that we have put the strategic restructuring of the business behind us," it looks forward to delivery of the first Nikola Tre BEVs to customers during the fourth quarter of 2021.
Additionally, The Financial Times' Claire Bushey reported, citing the company's internal review, that several statements made by Trevor Milton, the departed founder of Nikola, were inaccurate.
SOLAREDGE ENTERS SUPPLY AGREEMENT WITH SUNRUN: SolarEdge (SEDG) announced that it has entered into a strategic supply agreement with Sunrun (RUN). As part of the agreement, Sunrun will offer SolarEdge's next generation PV inverter, Energy Hub, for residential customers. SolarEdge is a partner helping Sunrun to support a complete residential energy ecosystem with integration of smart energy devices and home energy management through its Energy Hub inverter.
SUNPOWER DOWNGRADES: GLJ Research analyst Gordon Johnson downgraded SunPower (SPWR) to Hold from Buy and put his estimates and price target under review. He believes SunPower, like other solar specialty finance companies Sunrun and Sunnova Energy (NOVA) is "tethered to interest rates" and thinks the upside "trade" appears to be exhausted, Johnson told investors in a research note.
Credit Suisse analyst Michael Weinstein has also downgraded SunPower to Underperform from Neutral with an unchanged price target of $23. The company is executing as promised but valuation warrants a downgrade, Weinstein told investors in a research note. Further, the analyst believes SunPower's margin improvement could slow down in late 2021 due to rising rates.
