EV Stocks: Why BofA Is Bullish On Fisker, Bearish On Velodyne

The electric vehicle market is expected to see exponential growth in the years ahead, and this is reflected in the heady valuations investors are according to some of the stocks in the sector.

Against this backdrop, an analyst at BofA Securities looked at the prospects for some EV manufacturers and lidar suppliers to the EV makers in a Tuesday report. 

A Growing, Fiercely Competitive Industry: The EV industry is in a very nascent stage and the global penetration curve is likely to be a slow one over the next decade given the tough cost dynamics, analyst John Murphy said in a note.

On an absolute basis, volume growth is likely to be significant from a low base, the analyst said, citing industry data.

The competitive landscape among incumbents and entrants is becoming increasingly fierce, he said, adding that this is an unappreciated risk for EV makers.

Is Autotech The New Biotech?

Most auto tech companies are still very much in the R&D and pre-revenue/EBITDA/FCF stages, Murphy said.

The most appropriate investment approach is to use criteria such as technology, addressable market, competitive dynamics, go-to-market strategy, customers & partnerships, commercialization, revenue/EBITDA/FCF inflection, need and access to capital, management and valuation, the analyst said. 

Fisker Inc. FSR: Certain aspects of Fisker's go-to-market and commercialization strategy have merits, and its product is relatively compelling, he said. 

Lordstown Motors Corp. RIDE: The longer-term growth trajectory of Lordstown may be challenged by a narrow addressable market, Murphy said. 

Canoo Inc.'s GOEV business model is no more refined or planned than it was at its inception, with several significant pivots just recently announced, the analyst said.

The change introduces further risk around the company's ability to execute in a timely fashion, he said. 

Related Link: 3 EV Stocks Set To Go Even Lower

Velodyne Lidar, Inc. VLDR: The company has been a trailblazer in R&D-oriented lidar technology but the future for commercially-targeted lidar is far from clear, Murphy said. Velodyne appears to be lagging its closest peer Luminar Technologies, Inc. LAZR in booking multiyear contracts for Automotive/ADAS/AV series production, the analyst said.

Although the company is making progress on booking multiyear production contracts, they appear to be increasingly coming from non-automotive end markets, which is concerning, he said. 

Murphy also expressed worries over significant management turnover. 

Luminar Tech: The company is an emerging leader in next-generation, commercial lidar, as seen with recent and forthcoming automotive series production wins across major automakers and suppliers, the analyst said.

Production is not slated to commence until the end of 2022, he said. 

"Moreover, the company's total addressable market (TAM) estimates appear very aggressive, and the LIDAR space is setting up to be one of the most crowded and most competitive segments of the vehicle, which will challenge entrants and incumbents alike." 

The EV Ratings

BofA initiated coverage of Fisker with a Buy rating and $31 price target.
The firm started Lordstown at Neutral with a $31 price target.
BofA initiated coverage of Canoo with an Underperform rating and $6 price target.
The firm launched coverage of Velodyne with an Underperform rating and $14 price target.
BofA initiated coverage of Luminar Tech with a Neutral rating and $23 price target.

EV Stock Price Action

At last check, Fisker shares were rallying 3.48% to $12.80

Lordstown shares were down 3.15% at $8.91. 

Canoo was declining 7.97% to $7.62. 

Velodyne shares were slipping 2.92% to $13.65.
Luminar Tech was down 3.62% at $16.23. 

Related Link: Why Morgan Stanley Is Bullish on QuantumScape, Fisker, Bearish On Lordstown, Romeo Power

Photo courtesy of Fisker.