The SPAC Boom Is Over, But EV Is Still Big Business
The EV market has been under some pressure the last few months and for good reason. While the EV Market is strong and growing, the valuation of the stocks was driven by hype centered on the future promise of the market.
Yes, one day, these stocks will be worth the high prices paid for them in late 2020 and early 2021, but for some those days are still a long way off. The SPACs, in particular, we're vulnerable because they're all early-stage startups with no revenue, dubious capitalization, and many hurdles to cross before production ramps and true revenue growth can begin.
Ultimately, the market will come back, but until then investors should focus on only the highest quality EV stocks and wait for fundamental changes in the SPAC names before adding any more money.
1. Insider Buying At The Rev Group
The Rev Group (NYSE:REVG) is a diversified play not only on EV, but on vehicles in general, and one that we are growing to like more and more. The company manufacturers specialty vehicles, like, ambulances, fire trucks, buses, mass transit, and RVs, and is making the switch to EV in all segments.
The company recently reported earnings in which revenue growth topped 17%, regained pre-pandemic levels, and favorable guidance was issued. Triple-digit growth in the RV segment and single-digit growth in the emergency vehicle segment offset weakness in the commercial segment, and set the company up for larger gains as the economic recovery unfolds.
The company took advantage of recent share-price strength to price a secondary offering which we have mixed feelings about. While we do not like the idea of diluting shareholder value, the boost to the company's capital position is a net positive. The upshot is that the company's CEO bought nearly 20,000 shares for just over $306,000. This brings the CEO holdings to over 968,000 shares and total inside ownership to over 4.3%.
While not a definitive sign of the company's performance, it does reveal CEO confidence and we take that as a very good sign. The price action is down in the wake of these events but appears to be finding support at the top of an open price window. If support at the $16 level doesn't hold, we expect to see shares pull back to the $14 level before making a significant bounce.
2. Tesla Is The Well-Established Leader In EV
Love it or hate it, Tesla (NASDAQ:TSLA) is hands-down the leader in the EV market today, and shares are well off of their recent highs. The company alone accounted for more than 15% of the global market share in 2020 EV sales and is expected to maintain its leadership position long into the future.
Analysts at Mizuho just called the stock out, reiterating a buy rating, noting Bullish Trends in the industry and Tesla’s 24% market share in the first quarter of this year. Their outlook is for Tesla to maintain at least a 10% market share based on the idea it will be able to gain traction and maintain share in the face of strengthening competition from the OEM manufacturers.
Two of Tesla's many advantages are superior battery technology and advances in autonomous driving. Mizuho's base-case price target is $820 or about 30% upside.
3. General Motors Is All In On EV
General Motors (NYSE:GM) was the first of the major OEMs to go all-in on EV and is making good on its promises. Not only is it investing upwards of $26 billion into EV research, development, and infrastructure, it is making inroads into industries outside of automobiles.
The latest news is a collaboration with Wabtec to use GM's Ultium Battery Technology and Hydro-Tech fuel cell systems to power locomotives. Electrification of locomotives is not new, but up till now, has relied primarily on diesel/carbon powered generators or exterior means of electrification.
While big news for the locomotive industry, we feel this news has far wider-ranging implications. If GM batteries and technology can power a locomotive, what can it not power?
