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Tesla Results

On Wednesday, Jan. 27, Tesla (TSLA) reported fourth quarter non-GAAP earnings per share of 80 cents and revenue of $10.74 billion, with consensus at $1.01 and $10.32 billion, respectively. The company also stated: 

"While 2020 was a critical year for Tesla, we believe that 2021 will be even more important... We are planning to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. In some years we may grow faster, which we expect to be the case in 2021.

"The rate of growth will depend on our equipment capacity, operational efficiency and capacity and stability of the supply chain. We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans, and other expenses. We expect our operating margin will continue to grow over time, continuing to reach industry-leading levels with capacity expansion and localization plans underway."

Moving To Sidelines On Valuation

On Thursday, Jan. 28, JMP Securities analyst Joseph Osha downgraded Tesla to Market Perform from Outperform. The stock looks "fairly valued" even though the company showed a "very nice looking" Model S update and its "hard-to-forecast" emissions credit sales exceeded expectations, the analyst told investors.

Osha further stated that while the fiscal year 2021 unit outlook for Tesla is higher, he cannot justify higher target multiples than 7-times revenue and 35-times EBITDA.

Lordstown Builds To Begin Next Month

Lordstown Motors (RIDE) said it remains on track to begin production of the Lordstown Endurance, which is anticipated to be the world's first mass produced full-size all-electric pickup truck, this year.

"We are hard at work in the factory preparing to begin Beta builds in the coming weeks," remarked Steve Burns, CEO of Lordstown. "With this step on the horizon, we remain on track to meet our September start-of-production timeline while continuing to see indicators of strong demand for an all-wheel drive, full-size electric pickup truck with 250 miles of range from commercial, government, and military fleets."

The Lordstown Motors Electric Van is in development with plans to be unveiled in June and production starting in the second half of 2022. Based on the Endurance platform, the van will utilize hub motors to achieve all-wheel drive and low ground clearance, and have a class-leading range. An initial use case of the van will be as the world's first production all-electric RV, produced in partnership with Camping World (CWH), the company said.

Following the news that Lordstown Motors will start to build the fleet of beta prototypes of the Endurance pickup next month, InsideEVs' Mark Kane wrote that the first units should be ready in March. The company intends to use lithium-ion batteries from LG Chem's LG Energy Solution - the packs to be produced in-house, the publication noted.

30-All Electric Models By Mid-Decade

General Motors (GM), which announced that it plans to become carbon neutral in its global products and operations by 2040, said in a press release that the use of GM's products accounts for 75% of carbon emissions related to this commitment.

"GM will offer 30 all-electric models globally by mid-decade and 40% of the company's U.S. models offered will be battery electric vehicles by the end of 2025," GM said. GM also announced that they will eliminate tailpipe emissions from new light-duty vehicles by 2035.

Afterward, Morgan Stanley analyst Adam Jonas raised the firm's price target on General Motors to $80 from $57 and kept an Overweight rating on the shares. While he has "repeatedly expressed" optimism over the potential for both GM and Ford (F) to achieve a tech/ESG-driven multiple expansion on the EV opportunity, Jonas has now made material adjustments to his long term earnings forecasts, models, and sum-of-the-parts assumptions for both to account for reduced valuations of the ICE business and increased valuations for the EV and AV-related businesses, he told investors on Friday.

At the same time, Jonas downgraded Ford to Underweight from Equal Weight with an unchanged price target of $9. Based on his assessment of the regulatory, technological, and economic factors driving de-carbonization - including his expectations of the rapidly declining cost of electric vehicles and rapidly rising cost of internal combustion engines and cost of ownership - he believes that internal combustion engine, or "ICE" technology is "worth near zero today," and "could potentially crystallize into a net liability," particularly for Ford, Jonas said.

Hydrogen Truck Ecosystem

JBHT Navistar (NAV) is introducing a complete solution for customer implementation of a zero-emission long-haul system, which will be initially piloted by J.B. Hunt Transport (JBHT), in collaboration with General Motors and OneH2.

Navistar collaborates with General Motors and OneH2 to introduce a complete hydrogen solution for a zero-emission long haul transportation system. Navistar plans to make its first production model International RH Series fuel cell electric vehicle commercially available in model year 2024. Test vehicles are expected to begin the pilot phase under the new, complete solution at the end of 2022.

Under its partnership agreement with Navistar, OneH2 will supply its hydrogen fueling solution, which includes hydrogen production, storage, delivery, and safety. In addition, Navistar is taking a minority stake in OneH2.

Plug Power Initiation

Piper Sandler analyst Pearce Hammond initiated coverage of Plug Power (PLUG) with a Neutral rating and $66 price target. The analyst is "impressed" with the progress Plug Power has made executing on its strategy.

However, the biggest challenge is valuation given the "growing imbalance" between the supply of investable renewable energy enterprises and the "increasingly frenzied demand for this space," Hammond tells investors in a research note. He believes the stock's current risk/reward is more balanced.

Valuation Concerns

On Thursday, Bank of America analyst Julien Dumoulin-Smith downgraded First Solar (FSLR) to Underperform from Neutral with a price target of $97, up from $94. While admitting that the First Solar has been the beneficiary of ESG flows, he sees "structural headwinds" and thinks the stock is being afforded a valuation reserved for companies that consistently post EBITDA margins higher than those historically reported by First Solar.

Though the analyst projects what he calls "generous improvements in EBITDA margins" to about 20%, he would caution investors on "applying a further generous multiple on top," adding that he sees the solar sector "as pricey - and at risk of being 'toppy'."

On Friday, UBS analyst Jon Windham also downgraded First Solar to Neutral from Buy with a price target of $110, up from $95. He had expected an extension of the U.S. Federal investment tax credit to support a higher multiple for the shares, but with the ITC having been extended for two years at a 26% rate in December 2020, that thesis has now played out and Windham sees limited catalysts in the near-term to drive a continued re-rating of the shares, he said.

In addition, he now sees the potential for "post-election policy enthusiasm" about alternative energy to turn to disappointment in the actual pace of new renewables deployments, Windham added.

Moving To The Sidelines

Piper Sandler analyst Kashy Harrison downgraded SunPower (SPWR) to Neutral from Overweight with an unchanged price target of $35. The 110% year-to-date rally in the shares can probably be attributed to the "retail-driven move" on high short interest stocks, as nothing "thematically meaningful has manifested more recently capable of warranting this magnitude of outperformance," Harrison told investors in a research note.

Further, the analyst argued that the valuation spread between SunPower and peers is difficult to rationalize based on margin profiles and the competitive structure of the solar value-chain. As such, Harrison does not anticipate any catalysts for SunPower "capable of supporting this magnitude of a move."

Increasing Competition

On Tuesday, Northland analyst Gus Richard downgraded Luminar (LAZR) to Market Perform from Outperform with a price target of $38, down from $41. While he continues to believe that Luminar will be a leader in the lidar market with what he sees as the best technology, Richard noted that there are now five lidar companies that are public or in the process of going public via a SPAC, and that Luminar is still 18 months away from volume production.

Even with an assumption of a 100% share, Luminar is trading at 5 times what he estimates to be the automotive Lidar market value of $2.5 billion in 2025.