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Cashing in on the EV Boom

Cashing in on the EV Boom

The list of things that are gearing up because of the EV boom is a long and lucrative one. It’s not just about EVs anymore. EVs are simply one delivery mechanism in a massive worldwide energy transition. Mentioned in today’s commentary includes:  Blink Charging Co. (NASDAQ: BLNK), Plug Power Inc. (NASDAQ: PLUG), FuelCell Energy, Inc. (NASDAQ: FCEL), Li Auto Inc. (NASDAQ: LI).

Sure, September saw record EV sales up 91% year-on-year, with UBS forecasting that EV market share will reach 40% by 2030, and Tesla planning to rapidly accelerate production with 3 new factories in 3 countries and 20 million EVs coming off the line by 2030, for a 40x increase over this year. But there are major money-making opportunities in the tie-ins to this sector. 

If you want to ride the biggest tailwinds, it’s about battery metals … and stocks like Lithium Americas and Galaxy Resources–both pure plays. It’s about charging stations … and powerhouse speculative plays like Blink Charging. It’s about hydrogen fuel cells … and stocks like Plug Power and Fuel Cell. It’s even about the energy transition and high-tech software fueling this boom….

Chipmakers like Nvidia are setting the foundation of the future…While innovative tech platforms like Facedrive (FD,FDVRF) with its electric car ‘on demand’ service and exploding food delivery business are bringing that future to life. And the timing has never been more perfect.

Tesla has paved the way…but investors are only beginning to see the bigger picture. And the opportunity to cash in on the “electrification of all things” is practically limitless.

Especially for an ambitious young company like Facedrive which is rethinking entire industries, from ridesharing and food delivery to the very concept of car ownership as we know it thanks to its latest acquisition of Washington DC-based Steer, an electric vehicle subscription service set to bring EVs to the masses.

And because the industry is still in its infancy, there are countless ways to profit…from battery metals to full-scale tech platforms, early investors will be the biggest winners.

Lithium: The One Thing Standing Between Tesla and Global EV Domination

For pure-play lithium producers who have been waiting a while to reap the rewards from the EV boom that time has arrived. That supply crunch we’ve all been anticipating for years is now upon us. 

On September 22nd, on Tesla’s battery day, Elon Musk–who also just leapfrogged past Bill Gates in his massive, fast-track accumulation of wealth–revealed his plans to build enough battery capacity to make 30 million EVs by the end of this decade. That’s from 500,000 to 30 million …. That’s a lot of lithium. 

It’s been a long, painful road. But the bottom of lithium prices appears to have been reached, and the timing to get in on pure plays seems ideal, with analysts forecasting an increase in lithium demand this decade of over 6x. That’s coupled with a reduction in supply for various reasons, from bankruptcies that have taken some players out of the game to scale backs and delays in expansion plans when everyone jumped the gun on this earlier. 

Hotter-Than-Hot: EV Charging and Hydrogen

These are speculative story stocks, but this is definitely story time. Remember the Tesla story? Anyone who opened that book early on is probably a millionaire now–at worst. Every single tie-in to the EV industry is a speculative stock, but speculative in this case means smart. 

Blink (BLNK) is building an EV charging network that may be small right now, but it’s got explosive growth potential that is as big as the EV market itself. This stock is on a major tear and all that cash flowing into it right now gives Blink the superpower to acquire and expand. A wave of new deals, including a collaboration with EnerSys and another with Envoy Technologies to deploy electric vehicles and charging stations adds further support to the bullish case for Blink.

Michael D. Farkas, Founder, CEO and Executive Chairman of Blink noted, “This is an exciting collaboration with EnerSys because it combines the industry-leading technologies of our two companies to provide user-friendly, high powered, next-generation charging alternatives. We are continuously innovating our product offerings to provide more efficient and convenient charging options to the growing community of EV drivers.” And then there’s hydrogen, and other speculative arena bursting at the seams. 

Investors are piling in, and governments, too. (So is big oil). And last week, “green” hydrogen development got a further nudge towards commercialization when a pilot project for heating homes was approved. 

Billionaires couldn’t keep their hands off of Plug Power (PLUG) this year, with giant BlackRock’s Larry Fink piling in heavily, among other heavy hitters. Why? Partly because Plug Power is already providing its hydrogen-powered tech solutions to big-name retailers, but overall, because the green revolution is clearly happening and unfolding as we speak. It helps that Plug’s full-year guidance implies year-on-year sales growth of around 35%, even if profit won’t come for a while. 

Morgan Stanley’s Stephen Byrd believes green hydrogen will become economically viable quicker than investors appreciate saying Plug Power’s deal with Apex Clean Energy to develop a green hydrogen network using wind power offers a chance to tap into “very low cost” renewable power and helps accelerate the shift to clean energy. Plug has a goal for over 50% of its hydrogen supplies to be generated from renewable resources by 2024.

The company has also just announced a partnership with Universal Hydrogen to build a commercially-viable hydrogen fuel cell-based propulsion system designed to power commercial regional aircraft. The initiative will help bring Plug’s proven hydrogen ProGen fuel cell technology to new markets.

FuelCell Energy (FCEL) is another alternative fuel stock that has turned heads on Wall Street. Up over 219% year to date, FuelCell has been one of the biggest winners over the election season, with President-elect Joe Biden campaigning for a carbon-free America. In fact, analysts even estimate the U.S. could spend as much as $1.7 trillion on clean energy initiatives over the next 10 years. And that’s great news for companies like Blink, Plug and FuelCell.

Though many expect FuelCell to return to earth in the short-term, its long-term trajectory is solid. It has spent years building a patent moat and developing solutions that will tie into the energy transition perfectly.

FuelCell may be expected to see a hit due to its looming Q4 earnings report, which is expected to go poorly, but the company has managed to take advantage in its earlier rally, raising net proceeds of over $150 million in a public offering of 25 million shares.

Software and Services: The Real EV Cash Cow

When Morgan Stanley recently raised its rating on Tesla (for the first time in 3 years)–to $540–it only took two weeks to blow the roof off of that. Tesla is now trading at over $643, just when you thought it had no further space to soar. Why? Because this isn’t just about EVs anymore. We’ve gone way beyond that.

As Morgan Stanley put it when it raised Tesla’s rating: “Tesla is on the verge of a profound model shift from selling cars to generating high margin, recurring software, and services revenue … To only value Tesla on car sales alone ignores the multiple businesses embedded within the company.” And on the services and software scene — the latest investor buzzword is “tech ecosystem”. That’s the buzzword that brings in all the money now because of the potential for unlimited revenue-generating verticals. 

With that in mind, another one to look at is Canadian Facedrive (FD,FDVRF), which has by now made major inroads into the U.S. It’s already got tie-ins to household names like utility giant Exelon, and more … aiming at a series of multi-billion-dollar industries. 
Just like Apple isn’t just about the iPhone anymore, and its big revenue will come from services, the EV industry isn’t just about cars, either–it’s about platforms. 

Facedrive’s flagship EV-focused ride-hailing platform was only the pioneering beginning of the carbon-offset ride. Next game food delivery, pharma deliveries, and even COVID and social distancing tie-ins, with TraceScan contact-tracing and eSports revenue. 

The biggest coup, though–and the one that got Facedrive solidly in the U.S. market–was its September acquisition of Steer–the platform of platforms in the EV revolution. Steer plans to challenge the entire private car industry by changing the way an entire continent views car ownership. And by offering customers an entire virtual garage of EVs … from the Tesla line-up to the Audi e-Tron and everything on your EV luxury list, as well as more mainstream offerings. 

What we like is that this deal brings yet another big name into the Facedrive fold: energy giant Exelon, from whom Facedrive acquired Steer, and whose subsidiary is strategically investing in the Facedrive acquisition.

Chinese Automakers Should Not Be Ignored

Though Tesla has taken the title of de facto king of electric vehicles, Chinese automakers are picking up the pace, as well. And while Nio Inc has taken much of this spotlight due to its breakout this year, a newcomer on the scene is beginning to make big moves, as well.

Li Auto (LI) was founded in 2015 by its namesake, Chairman and CEO Li Xiang. And while it may not be a veteran in the market like Tesla or even NIO, it’s quickly making waves on Wall Street.

Backed by Chinese giants Meituan and Bytedance, Li has taken a different approach to the electric vehicle market. Instead of opting for pure-electric cars, it is giving consumers a choice with its stylish crossover hybrid SUV. This popular vehicle can be powered with gasoline or electricity, taking the edge off drivers who may not have a charging station or a gas station nearby.

Though Li just hit the NASDAQ in July, the company has already seen its stock price more than double. Especially in the past month during the massive EV runup that netted investors triple digit returns. It’s already worth more than $30 billion but it’s just getting started. And as the EV boom accelerates into high-gear, the sky is the limit for Li and its competitors.  

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.