What You Missed This Week in EVs and Clean Energy

Wedbush sees margin structure of the business model post price cuts as the main focus into Tesla earnings

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with "Charged," a weekly recap of the top stories and expert calls in the sector.

MARGINS THE KEY FOCUS FOR Q1: Barclays lowered the firm’s price target on Tesla to $230 from $275, while keeping an Overweight rating on the shares ahead of the Q1 results. The firm expects Tesla to sacrifice some margin for volume. However, offsets from price cuts include vertical integration and cost downs, Barclays tells investors in a research note. The firm still sees Tesla as a "structural winner" in electric vehicles, but reduced the price target to reflect margin pressures.

Wedbush also noted that with Tesla announcing solid Q1 deliveries of 423,000 that beat the Street in early April, the main focus of the Street heading into earnings this Wednesday after the bell is the margin structure of the business model post price cuts. With a series of price cuts implemented globally by Tesla across Model Y/3 and S/X in China, U.S., and Europe consumer demand has clearly been catalyzed for Tesla in the field at a time the EV arms race is heating up globally, the firm points out. Wedbush keeps an Outperform rating on the shares with a $225 price target.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

EV BATTERY PLANT: Japan’s Panasonic (PCRFY), a battery supplier to electric vehicle maker Tesla, said on Sunday that it is considering building a battery plant in Oklahoma, its third in the United States, according to Reuters. "Panasonic has entered into an agreement with the State of Oklahoma that defines the eligibility and terms of the incentives under Oklahoma’s LEAD Act," the company told Reuters in an email, referring to an incentive package the state has established to attract major companies to its MidAmerica Industrial Park in Pryor.

MOVING TO THE SIDELINES: At the end of last week, Piper Sandler downgraded Rivian Automotive to Neutral from Overweight with a price target of $15, down from $63. The firm still likes Rivian’s strategy, but says the problem is, the strategy is costly. In order for Rivian to justify its cost structure, the company must spread its investment over millions of units like Tesla does, and in order to finance such aggressive expansion, the company will need capital, Piper tells investors in a research note. Specifically, the firm thinks $4B-plus will be needed to fund the company’s growth beyond 2025. Rivian shouldn’t abandon its strategy, but until funding is addressed, the stock will stay trading at book value, contends Piper. Piper thinks "considerable intrinsic value probably cannot be unlocked within the next 12 months."

UPDATED TIMING FOR DELIVERIES: Shares of electric vehicle company Faraday Future (FFIE) were up on Thursday after announcing the updated timing for start of deliveries of its FF 91 vehicle to users, including its three-phase delivery plan for its FF 91 vehicle, and date of its first vehicle coming off the production line. The company will start the first phase of the delivery process at the end of May.

COST CUTTING: China’s electric vehicle maker Xpeng (XPEV) unveiled on Sunday a new platform it developed in-house for making vehicles, which it said will reduce the development and manufacturing costs for its company’s upcoming models, according to Reuters. The Smart Electric Platform Architecture 2.0 will help Xpeng to reduce costs of powertrain systems including batteries by 25% and those of intelligent driving system by 50% by the end of 2024, Brian Gu, Xpeng’s president, told reporters in Shanghai on Sunday.

EV TRANSITION CHALLENGES: Mizuho initiated coverage of General Motors with a Neutral rating and $39 price target. While noting that GM has a broad consumer-commercial EV portfolio, the firm points out that this is currently only about 2% of the mix and while it sees GM being positioned "well for the next decade of EVs," a transition from a profitable, roughly 98% ICE portfolio to an EV portfolio that currently has a negative 15-30% gross margin "poses significant challenges."

BUY ENPHASE: Piper Sandler upgraded Enphase Energy (ENPH) to Overweight from Neutral with an unchanged price target of $255. The firm notes that Q1 U.S residential solar originations and sales were more favorable than feared, suggesting the U.S. is more likely to decelerate than decline during 2023. Decelerating U.S. coupled with significantly more international momentum than anticipated earlier this year may drive 40% sales growth for Enphase in 2023, Mizuho tells investors in a research note. The firm views the company’s Q1 earnings as a "critical update capable of validating" its view that Enphase can deliver attractive earnings growth within the current environment.

HSBC also initiated coverage of Enphase Energy with a Buy rating and $271 price target. Enphase has an 86% global market share in microinverters, chips used in household and commercial solar rooftop panels, HSBC tells investors in a research note. The firm notes the company dominates the U.S. market, where demand has "grown strongly, and can charge higher prices than its rivals." In addition, Enphase is expanding in Europe and also gaining ground in the "booming" energy storage system business, says HSBC.

Meanwhile, Deutsche Bank placed a "Catalyst Call: Buy" on shares of Enphase Energy as a short-term investment idea. Enphase has been a material underperformer year-to-date, with the stock down 24% versus a 20% gain for its direct peer group, driven by a cautious tone from management in early January on U.S. residential demand and origination trends in the California market, Deutsche tells investors in a research note. This has opened the opportunity for an attractive valuation level, says the firm. It believes the stock is well positioned in the short term and expects a "strong" Q1 earnings beat.

LOOK FOR BETTER RISK/REWARD: Deutsche Bank downgraded First Solar (FSLR) to Hold from Buy with a price target of $230, up from $190. Now is an opportune moment for investors to look for better risk/reward elsewhere in the solar space after First Solar’s stock rally of 45% since early November, Deutsche Bank tells investors in a research note. The firm remains positive on the company, recognizing that the company’s "strong" backlog and average selling price profile is improving, but at this point, it believes the stock is fairly priced. It would look to get more constructive if the share price sees "significant downside."

IMPROVED VISIBILITY: BofA upgraded SunPower (SPWR) to Neutral from Underperform with a price target of $15, up from $14. The firm sees improved visibility into the company’s 2023 profitability. SunPower shares have underperformed the solar sector in 2023, which creates a "far more balanced" risk/reward profile, BofA tells investors in a research note. The firm’s discussions with management and SunPower dealer partners indicate the company’s carried backlog from 2022 is an "underappreciated driver" of 2023 growth.

Meanwhile, Deutsche Bank placed a "Catalyst Call: Sell" on shares of SunPower as a short-term investment idea. The firm expects the company’s Q1 results to be disappointing versus Street expectations given significant increased expenses in the quarter. Deutsche also believes there are risks to the current guidance, which could be revised down with a "very cautious tone from management."

GLOBAL MLPE WAVE: HSBC initiated coverage of SolarEdge Technologies (SEDG) with a Buy rating and $418 price target, implying 48% upside. SolarEdge is the world’s largest module level power electronics provider and is expanding into the energy storage system battery market, HSBC tells investors in a research note. The firm believes the company is in a good position to "ride the global MLPE wave" due to its dominance in optimizers and strong networks in Europe.

REASONABLE VALUATION: Wolfe Research initiated coverage of Array Technologies (ARRY) with an Outperform rating and $25 price target. The firm sees Array as an alternative way to gain exposure to largescale solar at a "reasonable valuation" with the potential for upside from Inflation Reduction Act tax credits. Array is the second largest solar tracker company globally and is set to benefit from the utility-scale solar buildout "that could be in the early stages of a multi-decade run," Wolfe Research tells investors in a research note.

Keywords: charged, ev, electric vehicles, clean energy, solar, batteries