- As the new Biden Administration begins implementing their policy, climate change is most certainly front and center.
- A real example of the position that the United States has taken on the matter of vehicles powered by fossil fuels versus electric powered vehicles is already on the books in California
- XL Fleet got a boost as Analyst Gregory Lewis from BTIG initiated coverage with a buy rating and $30 price target.
As the new Biden Administration begins implementing their policy, climate change is most certainly front and center. Recently announced by the administration, the United States will re-enter the Paris Climate Accord as well as block the Keystone pipeline, which is meant to carry Canadian crude in the United States.
As the president reverses many of his predecessor’s climate policies and re-enters the global race to meet some very ambitious emissions targets, a few rather big potential investment opportunities are being presented. Here’s what we know and what it means to Investors today.
The renewable energy sector has been on a roll for a few years. Investors have been slowly leaving the fossil fuel sector and more recently through 2020, they have been doing so in droves. Where is the money heading? Companies in solar, wind and other alternative technologies that transitions the United States away from fossil fuels, such as electric powered vehicles.
The EV sector has been a force to reckon with in 2020 and by every measurement, we find that Investors expect a continued gain in momentum and an increasingly sharp shift from fossil fuel powered vehicles to EV well through 2024.
This shift away from fossil fuels is certainly real and it’s gaining momentum. It may even determine the kind of big infrastructure projects that get funded or approved within the United States in years to come.
Here’s what we know for certain:
A real example of the position that the United States has taken on the matter of vehicles powered by fossil fuels versus electric powered vehicles is already on the books in California. Today, with the new Biden Administration and a Democrat controlled House and Senate, it is almost certain that the shift to EV will only expand.
In 2020 (CA) Gov. Newsom laid an executive order: EXECUTIVE ORDER N-79-20, Stating: “It shall be a goal of the State that 100 percent of in-state sales of new passenger cars and trucks will be zero-emission by 2035. It shall be a further goal of the State that100percent of medium- and heavy-duty vehicles in the State be zero-emission by 2045 for all operations where feasible and by 2035 for drayage trucks. It shall be further a goal of the State to transition to100percent zero-emission off-road vehicles and equipment by2035where feasible.
Noted in the order, Governor’s Office of Business and Economic Development, in consultation with the State Air Resources Board, Energy Commission, Public Utilities Commission, State Transportation Agency, the Department of Finance and other State agencies, local agencies and the private sector, shall develop a Zero-Emissions Vehicle Market Development Strategy by January 31, 2021, and update every three years thereafter
Why is this important to know?
Attentive Investors that are aware of the zero emissions goals of California as well as the current administration’s stance on clean energy, are eying a potential gold mine stock with massive upside potential, XL Fleet.
Just yesterday, share price in XL Fleet got a boost as the Analyst Gregory Lewis from BTIG launched initial coverage of the commercial EV Powertrain maker with a buy rating and a target for the stock price that is roughly 50% above recent levels of $21.00 a share.
Lewis believes XL Fleet is worth $4.1 billion. He values the stock at three times the $1.4 billion in sales he predicts the company will achieve in 2024. Lewis projects the company will be bringing in $300 million a year in earnings before interest, taxes, depreciation, and amortization, which represents a massive growth in revenue from the $21 million that XL is expected to report for 2020.
How does XL Fleet benefit in relation to the Biden Administration agenda?
XL Fleet takes gasoline-powered commercial vehicles and fits them with batteries, electric motors, and control systems, transforming them into hybrids. It’s a niche strategy in a solid EV market that is set to break sharply upwards in the markets well through 2024.
XL Fleet’s customer counts are steadily increasing, and for good reason as we mentioned above. Their customers are often referred to as “Upfitters”. Basically, they’re companies that buy a chassis from a traditional vehicle manufacturer and then modify it to serve a specific purpose.
The “Upfitters” then sell the hybrids to companies that want to save some serious money on fleet operations, as well as to get ahead of emissions control policies before prices go even higher as demand for EV conversions is currently surging.
For today’s commercial fleet companies electrified vehicles make a lot of financial sense because the fleet can be charged at a central location overnight so the savings on gasoline pile up fairly fast. In the case of XL Fleet, the company’s products are already being used in select Ford (NYSE:F), General Motors (NYSE:GM) and Isuzu (OTCMKTS:ISUZY) fleet trucks.
The new BTIG Analysis and $30 buy rating for XL Fleet appears to be a modestly low valuation. It’s a safe Analysis to begin with though, as Analyst normally initiate coverage on the lower end to maintain their historical accuracy percentages amongst their peers. To elaborate on price targets compared to “X” times Ebitda, Tesla (TSLA), the EV leader, trades for roughly 40 times estimated 2024 Ebitda.
In contrast, based on the XL Fleet projections, and the recent price target by BTIG at the $30 range, the XL Fleet stock would only be trading for about 14 times the estimated 2024 Ebitda.
However, this is the first rating for XL and it’s typical for businesses that go public via mergers with special-purpose acquisition companies to have to wait a few months before Wall Street starts to weigh in. We expect the price target will be increased significantly moving forward.
Even Andrew Left’s Citron Research, a fund better known for its bearish calls, said that XL was worth $60 a share.
XL appears in every way to be at the beginning of a potentially significant move up the charts. Investors should certainly consider adding XL to their watchlist. XL Fleet is a single tier from becoming one of the stockrockets.pro ticker alerts.
As the new Administration is anticipated to continue the push forward on alternative energy and (ZEV) Zero Emission vehicles, the EV sector in general is expected to continue to out perform. XL Fleet specifically, is in a perfect position to reap substantial revenue growth in the process.
With recent headlines such as:
We would suggest to Investors to start your due diligence ASAP as we anticipate more action from XL Fleet in the very near future.
Author’s Note, Investors are encouraged to perform their own thorough due diligence.