Welcome to The Fly's latest edition of "Charged," where we look back at some recent analysts' notes, news and activity in the electric vehicle and clean energy space.
AUTO-EMISSIONS POLICY: The U.S. Transportation Department is moving to end a legal battle with California over the state's authority to regulate vehicle emissions, The Wall Street Journal's Timothy Puko reported. "The transportation sector is the biggest contributor to greenhouse gases in our economy-which means it can and must be a big part of the climate solution," Transportation Secretary Pete Buttigieg said. The National Highway Traffic Safety Administration is proposing to withdraw portions of a rule, approved under the Trump administration, to pre-empt states including California from issuing their own limits on greenhouse-gas emissions from tailpipes and their own mandates on zero-emissions vehicles.
EV CHARGING INFRASTRUCTURE: The White House has announced new progress on the Administration's "goal to accelerate and deploy electric vehicles and charging stations, create good-paying, union jobs, and enable a clean transportation future." According to a statement, "The Department of Transportation announced guidance on how grants can be used to deploy charging infrastructure and newly designated alternative fuel corridors; The Department of Energy announced new funding and partnerships for charger-related research and development; and The General Services Administration announced progress on the goal to transition the federal fleet to zero-emission vehicles. In March, the United States passed the milestone of 100,000 public chargers and these new actions will accelerate deployment to make driving an electric vehicle convenient in every part of the country." "The Department of Energy announced new research funding opportunities on three EV charging related topics: $10 million to research, develop, and demonstrate innovative technologies and designs to significantly reduce the cost of electric vehicle supply equipment for DC Fast Charging that will be needed in large number to support high volumes of EVs; $20 million to accelerate the adoption of commercially-available plug-in electric vehicles and supporting infrastructure through community-based public-private partnerships that demonstrate PEV technologies and infrastructure in various innovative applications and share resulting data, lessons learned and best practices with a broader audience.... $4 million to encourage strong partnerships and new programs to increase workplace charging regionally or nationally which will help increase the feasibility of PEV ownership for consumers in underserved communities."
DRIVERLESS CRASH PROBE: Engineers from Consumer Reports drove a Tesla (TSLA) Model Y with Autopilot on and no one in the driver's seat following a fatal crash in Texas, Keith Barry reported. Over several trips across the half-mile closed test track, the Model Y automatically steered along painted lane lines, but the system did not send out a warning or indicate in any way that the driver's seat was empty, Barry said. "In our evaluation, the system not only failed to make sure the driver was paying attention, but it also couldn't tell if there was a driver there at all," said Jake Fisher, CR's senior director of auto testing, who conducted the experiment. "Tesla is falling behind other automakers like GM (GM) and Ford (F) that, on models with advanced driver assist systems, use technology to make sure the driver is looking at the road." Investigators are probing the cause of a fatal crash last weekend in which an apparently driverless 2019 Tesla Model S struck a tree, killing the vehicle's two occupants.
LYRIQ ELECTRIC SUV COMING TO MARKET EARLIER: General Motors' Cadillac brand stated earlier in a press release that, "The production debut of the 2023 Cadillac LYRIQ is the culmination of a century of innovation and the beginning of a great new era. With testing of Cadillac's inaugural electric luxury SUV running ahead of schedule, the brand announced that customers may place order reservations beginning in September 2021, with initial availability starting the first half of 2022." The 2023 Cadillac LYRIQ is expected to go into production in the first quarter of 2022, with pricing starting at $59,990. It will be produced at GM's Spring Hill, Tennessee assembly facility, which is receiving a $2B investment to support electric vehicle production. An additional $2.3B is being invested in an all-new battery cell manufacturing plant at Spring Hill, by Ultium Cells LLC, the joint venture between GM and LG Energy Solution, GM stated.
BUY NIO: CLSA analyst Soobin Park initiated coverage of NIO (NIO) with a Buy rating and $50 price target. The analyst argued that after establishing itself as a premium electric SUV maker in China, NIO is now planning to move into sedans. Park sees the company's aim to enter the European EV market as "feasible." While he acknowledged that charging and price remain the key barriers to mass adoption of EVs, the analyst pointed out that he views NIO's battery-as-a-service subscription model as "innovative" and "game-changing."
SELL CANOO: Bank of American analyst John Murphy initiated coverage of Canoo (GOEV) with an Underperform rating and $6 price target. The analyst believes the EV industry is becoming "fiercely competitive" and penetration remains slow, even though it still translates into an absolute volume growth from a low base and a CAGR of over 30%. Murphy warned, however, that Canoo's business model is "increasingly in flux" with several "significant pivots" recently announced, and while the shift looks "logical," he is especially skeptical on its de-emphasized B2C subscription business, and sees the competition in its targeted B2B segment as very aggressive.
MOVING TO THE SIDELINES: Goldman Sachs analyst Mark Delaney downgraded Lordstown Motors (RIDE) to Neutral from Buy with a price target of $10, down from $21. The analyst believes Lordstown's plan to be the first mover in the fleet focused part of the electric vehicle pickup truck market "gives it an opportunity to be successful long-term." However, the company's recent issues with the Baja race, as the vehicle ran out of battery after about 40 miles, suggests there could be more development work to do on the powertrain than expected, Delaney contended. This factor, coupled with the global auto supply chain challenges that are making it difficult to obtain parts, could increase the probability that Lordstown's market entry will be delayed, the analyst added.
Bank of America analyst John Murphy also initiated coverage of Lordstown Motors on Tuesday with a Neutral rating and $13 price target as part of a broader research note on electric automakers. Murphy argued that Lordstown's key competitive advantages come in the form of support from GM with a production-ready high-volume plant that allows it to bypass obstacles between concept and production, though like its peers, the company remains in the R&D phase.
SELL FISKER: Delaney also downgraded Fisker (FSR) to Sell from Neutral with a price target of $10, down from $15. While the analyst appreciates the steps the company is taking to try to differentiate its upcoming products, Delaney is "incrementally concerned" about the company's "late time to market" as competition increases. Fisker is planning to enter the industry starting in the fourth quarter of 2022 with its Ocean SUV and also announced a plan for a "unique follow-on vehicle" with Foxconn (HNHPF) that could enter the market around the fourth quarter of 2023, Delaney noted. By the time this vehicle may be ramping, the competitive landscape "could be even more challenging," Delaney told investors in a research note. He sees benefits to Fisker's planned use of outsourced manufacturing, but does not consider the manufacturing model itself to be the key determinant of long-term product success.
More bullish on the stock, Bank of American analyst John Murphy initiated coverage of Fisker on Tuesday with a Buy rating and $31 price target as part of a broader research note on electric automakers. Murphy argued that Fisker's key competitive advantages come in the form of an "interesting and attractive" product and its platform sharing, even though its timeline to commercialization is a bit longer.
'SIGNIFICANT VALUE': Evercore ISI analyst James West initiated coverage of Plug Power (PLUG) with an Outperform rating and $42 price target. Plug's recent commercial developments are a "prescient move" to become a global leader in the generation, liquefaction, and distribution of green hydrogen, West told investors in a research note. The analyst sees "significant value" in the shares at current levels. He views Plug Power as a "strong company with a defensible and growing business with long-term franchise value."
Wells Fargo analyst Michael Blum also started coverage of Plug Power but with an Equal Weight rating and $30 price target. Plug has an an established market presence and "visible" growth trajectory in the fuel cell material handling business with potential for accelerated growth if its hydrogen initiatives achieve commercially success, Blum told investors in a research note of his own. However, much of the potential growth from hydrogen commercialization is already reflected in the current stock price, the analyst added.
DOMINANT POSITION: Evercore ISI analyst James West initiated coverage of Enphase Energy (ENPH) with an Outperform rating and $184 price target. The company has a a dominant position in the U.S. residential microinverter market and is well positioned to benefit from "strong" solar installation market growth, West told investors in a research note. The analyst believes the market is underappreciating Enphase's expanding revenue opportunity its continues to take share in the U.S. residential market, expands its international presence, and enters the U.S. commercial and residential storage markets.
FIRST SOLAR CUT: Barclays analyst Moses Sutton upgraded First Solar (FSLR) to Equal Weight from Underweight with a price target of $84, up from $65. The analyst does not expect polysilicon pricing pressure to be a "material tailwind" for the company as U.S. imports are dropping and tariffs are still rolling off. However, he recommends investors "side-step" the "crowded" First Solar short trade for now.
NEW TOP PICK IN U.S. SOLAR: Barclays analyst Moses Sutton upgraded SolarEdge Technologies (SEDG) to Overweight from Equal Weight with a price target of $365, up from $334, representing 43% upside. The analyst named SolarEdge his new top pick in U.S. solar. Consensus estimates are too low as upside potential from Kokam pricing and EnergyHub volume are being underappreciated, Sutton contended. The analyst views SolarEdge as among strongest positioned solar names into the first quarter reporting season.
LIDAR IN NASCENT STAGE OF ADOPTION: Bank of America analyst John Murphy initiated coverage of Luminar (LAZR) with a Neutral rating and Velodyne Lidar (VLDR) with an Underperform rating as part of a broader research note on autonomous car production. LIDAR, or LIght Detection And Ranging, is still in a nascent stage of adoption and the related companies are "uniquely levered" to the industry mega-trend of vehicle autonomy, which should translate into outsized unit, revenue, and earnings growth for these companies relative to other automotive players, the analyst contended. Murphy added, however, that expectations about the size of the LIDAR market and future position of LIDAR companies are "relatively optimistic," and that he expects LIDAR to be just one of several sensor solutions.
VISIBLE GROWTH TRAJECTORY: Wells Fargo analyst Michael Blum initiated coverage of Bloom Energy (BE) with an Overweight rating and $43 price target. Bloom has an "established market presence and visible growth trajectory" in the fuel-cell stationary power business with "multiple avenues for future growth" if the company's hydrogen initiatives achieve commercial success, Blum told investors in a research note. The analyst believes the shares screen attractive relative to peers, trading at a 2022 estimated enterprise value to sales of 4.0 times, compared to a median of 26 tomes for the peer group.
