Just over a year ago, Hyliion (NYSE:HYLN) was one of the hottest electric vehicle special-purpose acquisition company (SPAC) plays out there. Just before its “de-SPACing,” excitement over this maker of electric trucks and powertrains briefly sent HYLN stock to prices over $50 per share.
Flash forward back to now, and where are shares changing hands? Around $7.25 per share. So, what happened here? For starters, since early 2021, investors have dialed back expectations for EV stocks. The pivot from gas-powered to electric-powered vehicles isn’t slowing down. But said pivot is still in its early stages.
Second, in the case of Hyliion, there are now more doubts about its ability to live up to expectations. Some of the headwinds affecting it now may be of a more temporary nature. Yet there’s still a key one that stands to limit its long-term potential.
With this, shares seem primed to tank once again. Coming in with an F-rating in Portfolio Grader, this is a clear-cut busted growth story you should avoid.
HYLN Stock: Investors Are Taking Past Projections With a Grain of Salt
Last year, and through the start of this year, investors were willing to buy into the “story” with Hyliion. In terms of getting itself from zero-to-sixty, this early-stage company had a well laid-out plan. First, it set out to sell hybrid electric powertrain conversion kits for use in existing Class 8 (big rig) commercial trucks, originally built to run on CNG (compressed natural gas) or diesel.
Then, it would roll out its own Hypertruck ERX hybrid electric vehicle. Using a built-in RNG (renewable natural gas, or biofuel) generator to charge up its electric battery, the ERX was touted as a carbon-neutral alternative that wouldn’t be limited by America’s yet to be built-out charging infrastructure.
With this strategy, the company projected it would scale up in the span of a few years. For example, projections for 2024 called it to generate billions in revenue, with high EBITDA margins. Setting the bar high, it’s no shock investors were willing to pay $50+ per share for Hyliion’s SPAC predecessor. But since closing its blank-check company merger? Confidence it will live up to expectations has taken a serious dive.
Granted, that’s not the only reason HYLN stock has tanked throughout this year. There’s been falling enthusiasm for this space since President Biden took office. Mostly, due to the market realizing that this industry is still years away from truly taking off. But even if the U.S. Federal Government starts implementing policies that speed up the pivot to electrified vehicles, don’t expect it to save the day for this floundering EV name.
Further Disappointment Likely Ahead
Across-the-board, shares in early-stage EV companies remain down big from their past highs. Again, chalk this up mainly to investors putting the cart before the horse. Growth stocks in general are also struggling, as the market anticipates rising interest rates, on the heels of higher inflation.
That’s not to say that bullishness won’t return to this space. If the U.S. Congress passes the infrastructure bill, it could breathe life back into “green wave” plays, EV stocks included. Even so, don’t expect this to do much to change the fortunes of HYLN stock. Headwinds specific to the company will continue to outweigh any industry-wide tailwinds.
What do I mean? In the near term, it has become all the more clear that actual results for Hyliion won’t fall in line with the projections discussed above. As analysts at UBS noted in a recent research note, revenue from 2022 to 2024 will come in short of expectations. Factors like the labor crunch, and supply chain bottlenecks, are hurting its ability to hit its milestones. Sure, you can blame much of this on issues affecting the whole U.S. economy right now.
Yet even if the labor crunch, and the supply chain bottlenecks, work themselves out, the company still faces a longer-term hurdle. One that could prevent it from scaling up into a billion-dollar business. I’m talking about the risk highlighted in my last article on Hyliion: competition. Original equipment manufacturers (OEMs) are quickly re-positioning themselves for an electric future. If the established truck makers come out with their EV offers, where does that leave this upstart? More likely than not, left in the dust.
The Verdict on Hyliion
Some may see this beaten-down EV stock as an opportunity to go contrarian, and bet that analysts and investors are wrong in their assessment of Hyliion. However, based on what’s playing out? It appears the market is on the money with their bearish take on the company.
With more pointing to it floundering further, it’s still best to stay away from HYLN stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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