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.
RECALL IN CHINA: China’s State Administration for Market Regulation announced that Tesla will recall just over 80,000 vehicles due to software and seat-belt issues. A total of 67,698 imported Model S and Model X electric vehicles with a production date between September 25, 2013 and November 21, 2020 are being recalled. In addition, part of the imported Model 3 electric vehicles with a production date between January 12, 2019 and November 22, 2019, a total of 2,736, and domestic Model 3 electric vehicles, a total of 10,127, will also be recalled. Due to software problems in some vehicles within the scope of this recall, the feedback voltage of the power battery voltage sensing circuit may be inconsistent with the real voltage of the electric brick, resulting in a misjudgment by the battery management system, the agency said in a statement.
BALANCED NEAR-TERM RISK/REWARD: Citi analyst Itay Michaeli upgraded Tesla to Neutral from Sell with a price target of $176, up from $141.33. The year-to-date pullback in the shares has "balanced out" the near-term risk/reward, Michaeli tells investors in a research note. With Tesla’s multiple contracting to 30-times estimated 2023 earnings, some of the "prior baked-in expectations that we didn’t agree with are out of the stock," the analyst writes. Further, he says that while macro and competitive concerns are likely to remain an overhang on the stock with capacity rising, in a "hard landing scenario" Tesla’s long-term competitive position likely improves, potentially further enhanced by Inflation Reduction Act. To turn more bullish on Tesla, Michaeli would need greater confidence on the average selling price and auto gross margins.
‘CHALLENGING YEAR’ AHEAD: Jefferies analyst Johnson Wan downgraded XPeng (XPEV) to Underperform from Hold with a price target of $4.20, down from $18.60, telling investors that he expects a "challenging year" for China’s automakers. The "honeymoon stage of early NEV adoption" is coming to an end, there is intensified competition under a price war led by Tesla, and the removal of EV subsidies and rising lithium prices "could see margins collapse" for the group, Wan argues.
The analyst also assumed coverage of Nio (NIO) with a Hold rating with a price target of $11.26, down from $42.30. Until deliveries pick up, high fixed costs from R&D and SG&A will "continue to derail" Nio’s path to profitability, Wan contends.
BUY LI AUTO: Jefferies analyst Johnson Wan initiated coverage of Li Auto (LI) with a Buy rating and $20.66 price target. While Wan expects a "challenging year" for China’s automakers – citing the "honeymoon stage of early NEV adoption" coming to an end, an intensified competition under a price war led by Tesla, and the removal of EV subsidies and rising lithium prices – the analyst calls Li his "favorite NEV startup." He believes investors’ worries on the cannibalization between L9 and L8 are overdone as their customer bases differ and "the former’s customers typically have much deeper pockets," Wan tells investors.
ON THE SIDELINES: Morgan Stanley analyst Adam Jonas upgraded BorgWarner (BWA) to Equal Weight from Underweight with a price target of $45, up from $35. The market will be willing to pay a higher multiple for the "longer tailed" internal combustion engine business once it becomes more evident it will be accretive to long term margins, Jonas tells investors in a research note. The analyst believes BorgWarner has a portfolio of ICE and hybrid products that are "well positioned" for a more profitable de-adoption process for internal combustion products.
GREAT ENTRY POINT: Northland analyst Abhishek Sinha initiated coverage of Wallbox (WBX) with an Outperform rating and $16 price target. Wallbox – which designs and manufactures charging solutions for residential, commercial, and public usage – has "a powerful business model with high growth rates, solid gross margins, and a clear path to profitability," Sinha tells investors. The stock’s current valuation "offers a great entry point for investors looking to tap the EV Charging market," the analyst added.
COMPETITIVE ADVANTAGE: Northland analyst Donovan Schafer initiated coverage of Hyliion Holdings (HYLN) with an Outperform rating and $4 price target. The company’s three-phase, electrify-plus-range-extension approach is a unique and "uniquely viable" approach to tackling emissions in the long-haul trucking space, contends Schafer, who thinks the company added a competitive advantage with recent acquisition of GE‘s (GE) linear generator technology.
‘EASY MONEY’ HAS BEEN MADE: JPMorgan analyst Mark Strouse downgraded First Solar (FSLR) to Neutral from Overweight with a price target of $190, up from $147. The analyst cites the stock’s outperformance since the announcement of the U.S. Inflation Reduction Act for the downgrade. First Solar is the biggest near- and medium-term beneficiary from the IRA’s domestic manufacturing tax credits, but with the stock up over 20% over the past four months, the "easy money" has now been made, Strouse tells investors in a research note.
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