Welcome to The Fly's latest edition of "Charged," where we look at some analysts' notes, news and activity in the electric vehicle and clean energy space.

APPLE SELF-DRIVING EV

Apple (AAPL) will take at least half a decade to launch an autonomous, electric vehicle because development work is still at an early stage, Bloomberg's Mark Gurman reported on Thursday, citing people familiar with the matter. The technology giant has a small team of hardware engineers developing drive systems, vehicle interior and external car body designs with the goal of eventually shipping a vehicle, the author noted. That’s a more ambitious goal than in previous years when the project mostly focused on creating an underlying self-driving system, Gurman added. The company has also added more ex-Tesla (TSLA) executives to the project.

TESLA RATING CHANGES

On Thursday, RBC Capital analyst Joseph Spak upgraded Tesla to Sector Perform from Underperform with a price target of $700, up from $339. The analyst admitted to getting Tesla shares "completely wrong" with a new framework that re-evaluates the company's place in the industry, its growth opportunity, and its inexpensive access to capital. Spak also amended his 2025 deliveries forecast to 1.7M or a 28% 5-year unit CAGR versus his prior view of 1.3M to reflect Tesla's capacity additions and BEV share assumption.

On Friday, Evercore ISI analyst Chris McNally upgraded Tesla to In Line from Underperform with a $650 price target. Acknowledging the firm has "been on the considerably wrong side of TSLA for over a year now," McNally said the new rating more accurately reflects "how we typically discuss the stock." He previously struggled in analysis of Tesla since he viewed it as a "growth + premium Auto" company, but he believes tech/retail investors see Tesla as two separate tech companies - one company that is the market leader in electric vehicles and also an "optionality/amalgamation of multiple adjacent call options" on everything from full self-driving to storage to battery and powertrain tech, McNally said.

Earlier in the week, Exane BNP Paribas analyst Stuart Pearson downgraded Tesla to Underperform from Neutral with a price target of $340, down from $385. The analyst argued that Tesla no longer has the benefit of operating in a "vacuum of competition." With possible competition from Waymo, Didi, Baidu (BIDU) and even Apple, "we would not want to hold this stock the day the tech titans lay out their BEV/robotaxi plans," Pearson said. The analyst also pointed out that Tesla's 20M long-term volume target will require it to nearly triple its market share in the electric vehicle market while facing a host of new competition. If Tesla succeeds, the "rewards could be great," but the risk that it sacrifices price for volume, or that its battery technology fails or is superseded by solid-state batteries, is real, Pearson cautioned.

SALES MOMENTUM, AUTONOMOUS PLANS

Earlier this week, Credit Suisse analyst Bin Wang upgraded Li Auto (LI) to Outperform from Neutral with a price target of $40, up from $33, after the company's December delivery volume grew 32% month-over-month to a new high of 6,126 units. Management also guided to new order flow continuing to increase in January despite the introduction of Tesla's low-priced China-made Model Y, noted Wang. The analyst, who noted the better than expected sales momentum, also said that Li has introduced a "clear and ambitious plan" for upgrading its autonomous driving ADAS hardware and set-up.

PURCHASE ORDER

Workhorse Group (WKHS) announced that it has received a purchase order for 6,320 C-Series all-electric delivery vehicles from Pride Group Enterprises. The order is split between Workhorse's C-1000 and C-650 models and is subject to various production and delivery conditions. Initial delivery of the vehicles may begin by July 2021 and will run through 2026.

Commenting on the announcement, Roth Capital analyst Craig Irwin said he does not believe the agreement covers Pride's own fleet, noting that Price Group only operates 260 power units and 640 trailers in its company-owned logistics business. The purchase order with Pride "seems like it could more closely resemble a sales and distribution agreement," Irwin added. The analyst is "cautious" on Workhorse shares at current levels "given the sluggish deliveries ramp." He has a Neutral rating on the name with a $19 price target.

LITHIUM PHOSPHATE BATTERIES

NIO (NIO) plans to launch models with lower-cost lithium iron phosphate batteries to expand its consumer base, CNEVPost reported, citing a WeChat account that follows the Chinese auto industry. According to the report, Nio has contracted a production line of lithium iron phosphate batteries from CATL and the new cells are being tested and prepared.

STRATEGIC INVESTMENT

Plug Power (PLUG) and SK Group announced that the companies intend to form a strategic partnership to accelerate hydrogen as an alternative energy source in Asian markets. Through this partnership, Plug Power and SK Group intend to provide hydrogen fuel cell systems, hydrogen fueling stations, and electrolyzers to the Korean and broader Asian markets. In conjunction with this partnership, the companies have also entered into a definitive agreement for SK Group to make a $1.5B strategic investment in Plug Power and are announcing a plan to form a joint venture company in South Korea to support the rapidly growing Asian Market. Under the terms of the investment, a U.S. subsidiary of SK Group will make a $1.5B investment in Plug Power by acquiring approximately 51.4M shares of common stock at a price of $29.2893 per share, the 30-day VWAP as of January 5th, 2021 at a zero percent discount. The investment is expected to represent an approximate 9.9% pro forma ownership stake in Plug Power. The investment transaction is subject to customary closing conditions and regulatory approvals, and is expected to close in the first quarter.

RATINGS SHAKEUP AT GOLDMAN

Goldman Sachs analyst Brian Lee double downgraded First Solar (FSLR) to Sell from Buy earlier this week with a price target of $81, down from $101, as he believes the company's gross margins and earnings power are peaking in the near-term and as he sees more cyclical headwinds emerging. The analyst expects First Solar's earnings to decline by 17% annually over the course of 2021-2022 following a "peak" earnings year in 2020. This contrasts to most peers across the solar space averaging earnings growth of 20%-30% over the next few years, he contended. Lee believes First Solar's module selling prices will "decline sharply" starting in 2022 owing to the expiration of Section 201. The level of declines could be further exacerbated by the sheer amount of new module capacity being added across the industry over the next 1-2 years, he added.

Lee also downgraded Canadian Solar (CSIQ) to Neutral from Buy with a price target of $48, up from $43. While the analyst remains constructive on the broader outlook for the solar space, he sees limited upside in the near-term for Canadian Solar shares given the stock's recent rally, limited catalysts in the early part of 2021 and a gross margin recovery that could take well into the second half of 2021. As a result, Lee views earnings upside potential as limited "for the time being."

On the flip side, the analyst upgraded Enphase Energy (ENPH) to Buy from Neutral with a price target of $232, up from $127. Lee believes Enphase remains a "relatively early- secular growth story" within solar that merits "strong consideration as a core holding." The company offers "multi-year, multi-faceted growth potential" due to market share gains, new product growth from batteries, international expansion and new end market growth from commercial, the analyst contended. Lee's "blue sky scenario" indicates as much as $7 of earnings per share power by the middle part of this decade and an implied valuation range of $264-$342 per share.

Meanwhile, Enphase Energy announced the expansion of the company's long-term relationship with Sunnova Energy International (NOVA) to include Enphase Encharge storage systems. As a power service provider, Sunnova will empower its network of solar dealers in the U.S. to provide a simple upgrade path for existing Enphase homeowners as well as homeowners who are new to solar and storage.

VALUATION STRETCHED

Susquehanna analyst Biju Perincheril downgraded SolarEdge (SEDG) to Neutral from Positive with a price target of $340, up from $310. The analyst believes the outlook for the solar sector remains robust but sees most of the external catalysts for the sector already being priced in or have already come to fruition.

Johnson Rice analyst Martin Malloy also downgraded SolarEdge to Hold from Accumulate with a $315 price target. Shares have risen 128% since May 2019 and he is concerned about the timing of a rebound in the C&I market, which he noted accounted for 21% of the company's 2019 revenues. Malloy expects weak C&I markets and European seasonality to impact the company's fourth quarter results.

BUY LUMINAR, VELODYNE

Citi analyst Itay Michaeli initiated coverage of Luminar Technologies (LAZR) with a Buy rating and $40 price target. Luminar appears to be one of few LiDAR companies that are well positioned to lead in consumer and commercial autonomous vehicle LIDARs, Michaeli told investors in a research note. The analyst sees a favorable risk/reward at current share levels.

Michaeli also started coverage of Velodyne Lidar (VLDR) with a Buy rating and $31 price target. Velodyne's "early mover advantage" makes it the most established LiDAR company to date, he contended. The analyst likes the company's "diverse revenue sources" across auto and non-auto and sees new business momentum. Further, he finds the stock's risk/reward as favorable at current levels.

VELODYNE WARNS, PULLS GUIDANCE

On Thursday night, Velodyne Lidar announced preliminary fourth quarter 2020 revenue and provided an update on recent business trends and outlook. Largely as a result of COVID-19 related disruptions, management now estimates fourth quarter revenue in a range of $15.5M to $16M and full-year 2020 revenue of approximately $94M versus $101M as previously provided as guidance for the full year. "Without these unexpected end-of-year disruptions, Velodyne believes it would have met prior revenue guidance for 2020," the company stated. Velodyne also said: "Given the uncertainty around COVID-19 worldwide and its downstream impacts, and customer implementation timelines that are outside the company's control, the company has less visibility on the timing of expected purchase orders and other projects in the pipeline. Velodyne is monitoring the situation daily to understand COVID-19's impact on signed and awarded business, and other developments in customer plans affecting the new business funnel, bookings, the company's manufacturing capacity, and ultimately, revenue. With this reduced visibility and out of an abundance of caution, the company withdraws any previous financial guidance for 2021 at this time."

On Friday morning, Craig-Hallum analyst Richard Shannon said Velodyne Lidar's negative preannouncement and withdrawn 2021 sales guidance due to COVID impacts "are a bit frustrating, and will probably let a bit of air out of the LiDAR space that has been so hot the past couple of months." However, Velodyne announced that it added a new contract during Q4 and increased its project engagements from 175 to 183, "showing progress in the funnel," added the analyst. Shannon expects the news to take "some air out of the stock" but remains "very constructive" on Velodyne's medium and long-term outlook. Shannon is a buyer in the short-term "on any over-reaction" and still believes the stock should be owned by any long-term growth investors. He maintains a Buy rating on Velodyne Lidar with a $31 price target.

FORCE LABOR USE REPORT

Chinese solar companies including GCL-Poly, East Hope Group, Daqo New Energy (DQ), Xinte Energy and Jinko Solar (JKS) are named in a report by the consultancy Horizon Advisory about Xinjiang's rising solar energy technology sector being connected to a broad program of assigned labor in China, "including methods that fit well-documented patterns of forced labor," according to The New York Times' Ana Swanson and Christopher Buckley.