Hyliion (NYSE: HYLN) stock has been trending downwards since the completion of its reverse merger in 2020. What first started as hype surrounding the SPAC company SHLL has now simmered down alongside the majority of the EV SPAC Industry. However, despite the downtrend in the stock price, revenue projections over the next 5 years suggest the company will turnover $2 Billion in revenue by 2024. Furthermore, the heavy decline now sees the company trading well below the average 12 month price target from Wallstreet analysts. This article will break down the bearish and bullish forecasts for 2022 and provide a summary at the end.
Table of contents
Analysts forecasts for HYLN stock
Firstly, the general consensus amongst Wallstreet analysts is a Hold. According to CNN data, the median 12 month price target across 4 analysts sits at $17. This suggests an upside potential of 80% from the current trading price. These analysts include the likes of JP Morgan and Goldman Sachs Group. Analyst Paul Coster at JP Morgan listed coverage on HYLN stock with a neutral rating and a 12 month target at $27 (250%+ upside from the current trading price). Whilst the Analyst Mark Delaney at Goldman Sachs Group was more conservative with a price target of $12 a share (17% upside potential) and a Sell rating.
Hyliion’s Product Pipeline
Hyliion’s product pipeline is different from that of other EV truck competitors Tesla and Nikola. First, The latter companies intend to build their EV trucks from the ground up. Contrast that to Hyllion’s retrofit business model where they make the powertrain engine for fleets to incorporate into pre-built trucks. Hyliion’s two main products include the hybrid-electric drivetrain and the hybrid truck ERX solution. The production distinctions allow Hyliion’s products to capture a unique segment in the market. For example, Tesla is targeting the everyday consumer like Henry Ford. In contrast, Hyliion is serving the Fleet market such as JB Hans, Amazon, and UPS. Not to mention that Hyliion is travelling down the renewable natural gas route. Bullish investors interpret Hyliion’s unique product offering to mean a growing market share come 2022 and beyond.
Despite the red flags of unprofitability, negative operating cash flow, and insignificant revenue, the projections are showing strong bullish signals. Not to mention most fast-growing EV companies burn through cash on their product offerings, to begin with, to create long-term financial prosperity. Hyliion forecasts “revenue of $344 million in 2022, $1.019 billion in 2023, and $2.091 billion in 2024”. Moreover, Hyliion expects earnings before interest, taxes, depreciation, and amortisation (EBITDA) to “grow from $8 million in 2022 to $602 million by 2024”. Overall, the strong revenue growth suggests Hyliion is well-positioned to receive price-sensitive contracts, orders, and capitalise on the growing EV industry. (opinion not advice). However, investors must remember Hyliion’s financial estimates are just that estimates.
“We enter 2021 with strong financial and operational resources and an established network of strategic partners. The powertrain technologies we have already deployed, and those that we will bring to market, further differentiate Hyliion and reflect our unique competitive advantages. We are delivering proven, cost-effective and eco-friendly solutions that we anticipate will electrify and revolutionize the commercial transportation industry.” Thomas Healy, Hyliion’s Chief Executive Officer on Q4 earnings release.
Leadership flows from the top.
Thomas Healy is the founder and bullish visionary of Hyliion. Healy alongside his executives are setting a positive tone in the areas of patent protection, and revolutionising the EV truck space. Investors can see the patents Hyliion has secured here. Hyliion looks to pave the way for EV trucking through renewable natural gas. RNG not only creates net negative emissions but is also a unique offering in comparison to competitors. The leadership team is putting Hyliion in a strong growth position. Especially as a fair chunk of the trucking market is using RNG. For example, 80% of the natural gas used in vehicles within California comes from RNG.
Hyliion 2022 stock forecast and beyond – Bearish side
Social media exposure
A minor criticism is the lack of social media presence Thomas Healy holds in comparison to twitter EV giant Elon Musk. Especially in terms of promoting the products and their timeline to the main street in the masses. Consequently, fewer retail investors are aware of the growing green EV company. While there is an imbalance, Healy is ramping up the number of interviews, which are receiving strong engagement on Youtube. The recent interview with TD Ameritrade is a perfect example. Overall, it remains a minor criticism for now but something that will likely be fixed with more interviews, and more twitter activity.
Road to profitability
Despite the hype around the stock, Hyliion does have a few gaping holes in their financial scorecard. These include negative operating cash flow, a lack of profitability, and insignificant revenue levels. Hyliion remains unprofitable mainly because of its cash burn on producing the Hybrid electric drivetrain and ERX solution. The current revenue projections indicate that Hyliion is capable of turning their current financial situation into prosperity come 2021 and beyond.
Competition and the future EV industry
Some investors believe the cut-throat EV industry could work against Hyliion. Hyliion is going after a different part of the pie, renewable natural gas, and retrofit. Contrast that to Tesla aspirations of building their trucks from the ground up. Overall, Hyliion respects the competition for its different offerings but has a clear long-term future for the renewable natural gas segment.
Secondly, is the competing philosophies on which energy method is the most ecologically sustainable. Thomas Healy explains how Hyllion achieves net negative emissions by using renewable natural gas (RNG). The use of an RNG profile offsets the manufacturing emissions. Moreover, Healy explains how most EVs might produce zero emissions, but the manufacturing of electricity produces a negative environmental footprint. Because “the electricity could come from coal”.
Before I begin, I remind our viewers that this is not financial advice. Instead, the information above is an investment commentary from extensive research.
Overall, revenue/earnings growth, developments in their product pipeline, and potential contracts with fleeting companies look to be the argument for the bulls. Understanding the difference in business models between Hyliion and its EV counterparts is crucial. Because it will provide you with an excellent insight into what is realistic market share growth during 2021 and beyond.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin and Tyger Fitzpatrick
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