The high-flying electric vehicle (EV) sector has seen a mixed week of trading, with hydrogen fuel cell maker Plug Power surging double digits while EV charging company ChargePoint and startup EV manufacturer Canoo saw steep declines.
Plug Power Shares Jump on New Deals, Sales Outlook
Shares of Latham, New York-based Plug Power jumped 11.5% this week, recovering some of the over 30% decline the stock has seen over the previous three months.
The hydrogen fuel cell company announced two major new supply contracts that will expand its green hydrogen production capacity. Plug also hosted a hydrogen symposium where CEO Andy Marsh provided an upbeat sales outlook, forecasting $6 billion in revenue by 2027 and $20 billion by 2030. This exceeds Wall Street expectations of $5.5 billion in 2027 sales.
The new deals with Amazon and Universal Hydrogen helped instill optimism that Plug Power can meet its ambitious growth targets. The Amazon agreement expands Plug’s green hydrogen supply to power material handling vehicles at Amazon warehouses.
The Universal Hydrogen partnership will see Plug provide electrolyzers to produce hydrogen for the startup’s efforts to convert commercial planes to hydrogen fuel.
While investors welcomed the positive updates, the stock remains speculative given its rich valuation and the fact that Plug Power has yet to produce positive free cash flow. Critics also caution that management’s rosy revenue projections should be taken with a grain of salt, as growth companies often overpromise.
ChargePoint Plunges on Stock Sale, Profit Delay
Meanwhile, shares of leading EV charging network ChargePoint dove 17% this week after announcing a stock sale and pushing back its target for profitability. The Campbell, California-based company announced Wednesday that it will raise $231 million by selling stock to institutional investors.
This unnerved investors for two reasons. First, stock sales dilute existing shareholders. But more importantly, raising cash undercuts management’s previous claims that ChargePoint was well-capitalized. Just over a month ago, CEO Pasquale Romano said the company was “well-positioned and well-capitalized” to achieve positive adjusted EBITDA by the end of 2024.
Yet now ChargePoint suddenly needs to bolster its balance sheet, damaging Romano’s credibility. The money will “support our path to profitability in 2024,” delaying original plans to reach profitability by the end of next year.
The fundraising and delay in profitability contradicted ChargePoint’s rosy second quarter results in early September, when the company reiterated its 2024 profit guidance. This inconsistency and perceived lack of transparency has clearly tested investors’ trust.
Canoo Shares Continue Slide as Losses Mount
Rounding out the trio of slumping EV stocks is Canoo, which saw its shares plunge 19% amid the company’s deepening losses and uncertain path to production.
The Torrance, California startup has yet to generate revenue and reported a net loss of $125 million in the second quarter. Its specialty EV models have garnered interest, but production delays have plagued the company. Canoo previously projected 15,000-20,000 vehicles built in 2023, but it dialed that back to just 500-1,000 this year.
Like its EV peers, Canoo sports an astronomical valuation relative to sales. And with just $6 million in cash remaining as of June 30, the company relies heavily on stock sales to fund operations. This creates a highly speculative investment situation. Canoo shares have now tumbled nearly 80% over the past year.
Key Takeaways: Cautious Approach Advised
This week’s divergent stock moves illustrates the risky, volatile nature of investing in early stage EV companies. Stocks like Plug Power, ChargePoint and Canoo remain speculative plays given their steep valuations, widening losses, and delayed profitability outlooks.
While the electric vehicle sector holds long-term potential, interested investors should approach these stocks with extreme caution. Small positions that one could afford to completely lose are advisable.
Companies’ rosy projections should be viewed skeptically until production ramps up and positive cash flow is achieved. The inconsistent messaging and stock dilution seen at ChargePoint highlights the importance of transparency and underpromising.
With no profits yet in sight, investors should brace for continued turbulence in EV stocks like Plug Power, ChargePoint and Canoo. Patience and discipline will be key to navigating the sector’s hype and volatility.