Piper Sandler believes electric vehicles will represent 94% of new car sales by 2040. Welcome to The Fly’s latest edition of “Charged,” where we look back at some recent analysts’ notes, news and activity in the electric vehicle and clean energy space.
CHINA-MADE MODEL 23/Y RECALL:
China’s State Administration for Market Regulation announced over the weekend that Tesla (TSLA) would “recall” 249,855 China-made Model 3 and Model Y cars, and 35,665 imported Model 3 sedans due to risks associated with the autopilot feature. China’s state regulator said on its website that the recall is linked to an assisted driving function, which can currently be activated by drivers accidentally, causing sudden acceleration. Local registration data as of May shows Tesla delivered more than 275,000 imported and domestically-made Model 3s and Model Ys in China since 2019, suggesting most of the delivered cars will be recalled on the safety issues, Bloomberg News pointed out.
The Wall Street Journal‘s Eva Xiao reported that Tesla is addressing a safety issue in more than 285,000 passenger vehicles in China-including more than 90% of locally made vehicles sold by the company-associated with their cruise-control system, according to the country’s market regulator. The fix, which the State Administration for Market Regulation called a recall, requires affected Tesla customers to upgrade their cruise-control software remotely and doesn’t require going to the dealer, the Chinese regulator and company said.
EV NEW CAR SALES:
After assembling a brand-by-brand, region-by-region outlook, Piper Sandler analyst Alexander Potter thinks battery electric vehicles will represent 18% of new vehicle sales in 2025, 45% in 2030 and 94% by 2040. This equates to 18M units in 2025, 45M units in 2030 and 81M units in 2040, Potter tells investors in a research note. He believes China and Europe should lead the transition, with battery electric vehicles representing around a quarter of sales in 2025. By the mid/late 2020s, the analyst thinks all global regions “will be embracing BEVs with gusto.” He expects Tesla and newly-formed battery electric vehicles specialists to win share in the coming years. Among incumbents, Volkswagen (VWAGY), General Motors (GM) and Hyundai Motor (HYMTF) are best positioned, says Potter. Tesla is still his favorite way to invest in rising battery electric vehicle sales.
LUCID AIR EV KNOCKS MUSTANG MACH E FROM “PERCH”:
Electric vehicle startup Lucid showed off its Air sedan in Lower Manhattan Tuesday, which Barron’s Al Root believes will impress drivers when it becomes widely available in the third quarter. The Air, which has bumped Ford’s (F) Mustang Mach E from its “perch as the favorite EV ride,” boasts more than 1,000 horsepower and can go from zero to 60 miles an hour in about 2.5 seconds, and has completed a quarter mile in under 10 seconds, Root said.
E-SYSTEMS BUSINESS OPPORTUNITY:
Goldman Sachs analyst Mark Delaney upgraded Lear (LEA) to Buy from Neutral with a price target of $228, up from $198. The company has a growing opportunity in its E-Systems business, including with products for electric vehicles such as connectors, Delaney told investors in a research note. Further, the company could see content gains in its Seating segment, driven by the industry mix shift to SUVs and pickups, the analyst added. Delaney noted that Lear trades at a “meaningful discount” on earnings, revenue, and EBITDA to the “auto Tier 1 peer group.”
BUY AHEAD OF EVGO MERGER:
Roth Capital analyst Craig Irwin initiated coverage of Climate Change Crisis Real Impact I Acquisition (CLII) with a Buy rating and $21 price target. The company’s business combination with EVgo Services (EVGO) is expected to close on or around July 1. As a pure-play builder, owner, and operator of electric vehicle fast-charging infrastructure, EVgo has the largest public direct current fast-charging network and the first network in the U.S. powered entirely by renewable energy, Irwin told investors in a research note. He believes EVgo’s partnership with General Motors (GM) provides visibility.
LEADERSHIP IN RAPIDLY GROWING INDUSTRY:
Needham analyst Vikram Bagri initiated coverage of ChargePoint (CHPT) with a Buy rating and $39 price target. The analyst is positive on the company’s early mover advantage, its capital-light business model, and its superior product offerings. Bagri added that ChargePoint’s “seasoned” management team and “strong” customer relationships will allow the company to maintain leadership in a “rapidly growing industry.” The analyst further contended that ChargePoint represents a path to “diversified exposure” to EV adoption instead of buying single-name OEM securities.
Meanwhile, Jefferies analyst David Kelley also initiated coverage of ChargePoint with a Buy rating and $40 price target. ChargePoint is the U.S. charging infrastructure leader with 59% networked U.S. share, and 70% excluding Tesla, noted Kelley, who believes that scale provides it “a significant advantage” over competitors. He is modeling two-year and five-year revenue compound annual growth rates of 52% and 57%, respectively, for ChargePoint, he noted.
VALUATION, HIGH COSTS:
Canaccord Genuity analyst Jed Dorsheimer downgraded Plug Power (PLUG) to Hold from Buy with a price target of $31, down from $69. Post the accounting restatements, Plug Power is transitioning to more of an operational phase and will need to demonstrate profitability improvements to justify its “healthy valuation,” Dorsheimer told investors in a research note. The company’s first quarter revenue results were in-line with expectations, but its losses were wider than expected, the analyst said. Dorsheimer feels Plug’s costs are trending higher than previously expected, a trend he expects will continue. This “presents a new risk to the story,” Dorsheimer contended.
ATTRACTIVE ENTRY POINT:
Stephens analyst Gail Nicholson initiated coverage of Enphase Energy (ENPH) with an Overweight rating and $215 price target. The stock was negatively affected by semiconductor supply issues, but the pullback creates an attractive entry point for investors as the issues are transitory in nature, the analyst told investors in a research note. Nicholson added that she anticipates semiconductor issues being alleviated by the end of 2021, with the company poised for growth and market share expansion.
Meanwhile, Citi analyst J.B. Lowe initiated coverage of Enphase Energy with a Buy rating and $220 price target. The analyst called Enphase his top pick in North America renewable energy. The company is benefitting from a premium microinverter product as well as a growing energy storage business, Lowe told investors in a research note. While the stock’s valuation is “lofty,” the secular tailwinds of solar and storage installation growth and its proven ability to gain share in a competitive market justify the price target, the analyst added.
BUY FIRST SOLAR:
Stephens analyst Gail Nicholson initiated coverage of First Solar (FSLR) with an Overweight rating and $102 price target. First Solar’s differentiated CdTe technology offers higher real-world energy yield and long-term reliability advantages over the conventional crystalline silicon competition, said Nicholson, who believes its “stellar balance sheet” and differentiated technology should allow the company to potentially capture market share if it pursues expansion.
LONG-TERM VALUE POTENTIAL:
Stephens analyst Gail Nicholson initiated coverage of SolarEdge (SEDG) with an Overweight rating and $336 price target. The analyst anticipates the company should maintain its residential inverter market share, while growing its commercial segment. Nicholson also believes management’s decision to enter into new sectors was strategic and creates long-term value potential for shareholders.
Meanwhile, Citi analyst J.B. Lowe initiated coverage of SolarEdge Technologies with a Neutral rating and $300 price target. The company is benefiting from the “secular tailwinds” of solar and storage installation growth, but has lost some share in the U.S. residential inverter market and is “playing catch up” on the storage side with its first product shipping imminently, Lowe told investors in a research note.
Baird analyst Tristan Gerra upgraded Luminar (LAZR) to Outperform from Neutral with a price target of $30, up from $22. Driven by standard adoption of L3 hardware in next-generation vehicles, including with Volvo (VLVLY), Luminar is well positioned to upwardly revise its order book and raise its medium-term revenue outlook, Gerra told investors. Automakers seeking to catch up in highway autonomy could “add up to Luminar’s already-impressive design win line up,” the analyst added.
Credit Suisse analyst Andrew Kuske upgraded Brookfield Renewable Partners (BEP) to Outperform from Neutral with an unchanged price target of $45, citing the recent selloff. The 6% share pullback over the past month looks to be largely related to a Russell Index Rebalance that negatively impacted Brookfield Renewable Corporation’s (BEPC) “paired” security value, Kuske told investors in a research note. Brookfield Renewable Partners is “rather uniquely positioned” versus many major renewable power stocks with a “robust and flexible” funding model and a legacy skew towards higher value hydroelectric generation at the core of the asset base, Kuske argued.
Originally Posted on June 28, 2021 – Charged: Tesla Addresses Safety Issue In 285,000 Vehicles In China
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