The automotive sector is changing. A combination of social and political forces are increasingly pushing the industry towards adopting electric vehicles (EVs) as the new normal – although the internal combustion engine is not likely to be phased out entirely, EVs will certainly find a large niche. “Last mile” delivery and various fleet companies are already seeing that electric vehicles can effectively meet their needs.
But the electric car market is not just about cars. They can make headlines and Tesla may have become a trillion dollar company, but no electric vehicle is going anywhere if it can’t be charged. And this is a fact that leads us directly to the electric vehicle charging market.
The charging market is not an easy task. It is estimated to reach $25.5 billion by 2027. This growth will come from a combination of private and public support; Electric vehicle charging networks found a place in President Biden’s recent infrastructure bill, which earmarked $7.5 billion to fund the construction of 500,000 public charging stations, a goal that will form a coast-to-coast network. According to estimates by the US Department of Energy, reaching this goal by 2030 will require annual installations exceeding 11,000 charging stations.
Construction is just the beginning. A nationwide public charging network will bring a wealth of jobs in manufacturing, distribution, maintenance – all in all, it will be a boon for companies involved in the electric vehicle charging market. This will include major automakers and smaller EV companies, all of which are working on charging stations that can be sold with their cars, but will also include a slew of pure electric vehicle charging companies.
Pure-plays will deserve a second look from investors. Although the market is still young and most of these companies generate very little revenue or profit, they have always been valued at a high level in recent months. This is primarily a function of investors’ desire to invest early in a growing market.
We can get a taste of the opportunity here by looking at some of these pure-play charging companies. Using the TipRanks platform, we identified two such companies. These are buy-listed stocks with great upside potential – and they both recently got the thumbs up from Wall Street analysts. Let’s dive into it.
Solid power (PDLD)
We’ll start with Solid Power. This company is an industry leader in the development of solid-state rechargeable battery technology – a technology widely seen as the next step and likely replacement for today’s lithium-ion batteries. Solid Power’s battery design, using solid sulfide electrolytes, is safer than lithium-ion systems and more stable at high temperatures.
As it prepares for the expected boom in the charging and battery market, Solid Power has also just gone public. The company completed a SPAC merger in December, with Decarbonization Plus Acquisition III; the transaction was approved by SPAC shareholders earlier this month and the SLDP ticker hit NASDAQ on December 9. Solid Power raised $542.9 million in new capital from the business combination.
In its short time as a public company, Solid Power has caught the eye of Needham analyst Vikram Bagri, who sees several points for investors to consider.
“SLDP is one of the few solid-state battery (SSB) developers in the world, and we believe it has the potential to emerge as a leader for several reasons: 1) To separate itself from its peers , SLDP has charted many paths to success with a diversified business model. The company aims to be a leading producer of sulfide-based electrolytes, which positions it as a cog in the SSB value chain. SLDP is also developing three unique cell designs that incorporate its sulfur electrolyte and plans to license OEMs and battery manufacturers, 2) SLDP is lightweight and fully funded until commercialization in 2026, 3) The company is backed by two weights industry heavyweights, Ford and BMW, which validate its technology and mitigate associated risks, and 4) SLDP may reverse our estimates if it strikes a deal with other OEMs or achieves greater market share high d electric vehicles for Ford and BMW sales,” Bagri said.
These reasons confirm Bagri’s buy rating on the stock, and his price target of $13 indicates confidence in a 57% growth in the stock for the year ahead. (To see Bagri’s record, Click here)
Looking at Solid Power more broadly, we see that the stock has a Moderate Buy consensus rating; it is new to public markets and recently received 2 positive reviews. The shares are selling for $8.30 and their average price target of $13 matches Needham’s view. (See SLDP stock forecast on TipRanks)
Overall beam (BEEM)
The next stock we’ll look at, Beam Global, lives at the intersection of solar power and electric vehicle charging. Its main product is the self-contained renewable EV charger, the EV ARC, a self-contained solar-powered charging station that can fit into standard parking spaces and accommodate most EV models. The EV ARC can be deployed within minutes of delivery and operates off-grid for added flexibility.
A key advantage of Beam’s EV ARC is this quick setup. Customers do not need any permits, building works or electrical work for the station to be operational – and once blocked, the solar-powered station will not incur any utility bills. Beam has ARC EVs installed in 121 countries around the world; in the United States, it is deployed in 96 cities in 13 states. The EV ARC has found a niche with fleet operators, and the company’s customer list includes more than two dozen California government agencies and municipalities, and that state still has 52 systems on order. In recent months, the company also announced new deployments in Charlotte, North Carolina; San Jose, California; and New York.
Beam’s most recent quarterly report, for 3Q21, showed the strength of several metrics. Revenue reached $2.02 million, a third-quarter record for the company and a 63% year-over-year increase. Looking ahead, the company reported a backlog of $7.1 million, its highest level ever and an important indicator of future revenue. The sales pipeline also expanded from $50 million to $75 million. New orders in the third quarter topped $5 million.
Despite this growth, BEEM shares are down; the stock has lost 76% in the past 12 months. This drop came even as Beam’s product faces a higher demand universe. Major EV manufacturers such as Ford and Tesla have recently increased shipments, which may translate to demand for Beam’s compatible product.
Maxim’s 5-star analyst Tate Sullivan has this in mind when he writes: “More electric vehicles on the road should increase customer demand for public charging stations, including the off-road charging product. BEEM network. TSLA delivered 308,600 electric vehicles in 4Q21, above consensus of 263,000. Deliveries were up 71% y/y and 28% q/q. We believe this pace of deliveries will continue to lead to more TSLA electric vehicles on the road for every TSLA charging connection…”
“We expect revenue to increase to $3.0 million in 4Q21 from $2.0 million in 3Q21, and to $19.8 million in 2022 from $8.5 million in 2021,” said added the analyst.
Sullivan’s earnings forecast supports his Buy rating on BEEM, while his $50 price target implies a robust upside of 248% over the next 12 months. (To see Sullivan’s track record, Click here)
Overall, the analyst consensus rating on BEEM shares is Moderate Buy, based on a mix of 2 buys and 3 holds. The shares are selling for $14.35 and their average price target of $40 implies a year-over-year upside of around 179%. (See BEEM stock forecast on TipRanks)
To find great ideas for EV stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.