FREY - 4 Stocks To Watch In The $1.8 Trillion Race To Net Zero
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Cutting downemissions to net zero is one of the world’s most ambitious goals,thanks to the Paris climate agreement. That goal is being taken soseriously that BloombergNEF recently reported that the amount investedin the green energy transition will reach a staggering $1.8 trillionin 2023.
But forthe world to achieve net zero status, shifting our transportation’sreliance from internal combustion engines to electrical vehicles willhave to be accelerated. Last year, global sales of EVs, includingBEVs, PHEVs (Plug-in Hybrid Electric Vehicles), and FCVs (Fuel CellVehicles), reached 13 million units in 2023, representing a 29.8%growth compared to 2022.
At the same time, the world put $634 billion toward electricvehicles and charging technology in 2023, or 85% of its totalinvestment in clean technologies that consume energy, according toBloombergNEF, which drew more spending than renewables for the firsttime.
Over thepast couple of months, the electric vehicle (EV) sector has been goingthrough turbulent times against the backdrop of macroeconomicheadwinds and intense competition. This has caused the markets tooverreact to the downside, creating opportunities for buying EV stocksat a valuation gap.
In our view, even the slightest of positives could translateinto a significant rally from oversold levels for EV stocks. Andit's not only pure EV makers that will benefit from this trend butalso the picks and shovels of the industry, like battery makers. Hereare four stocks to add to your watchlist.
VivoPower International (NASDAQ:VVPR) is a sustainable energy solutions company that has recently beenmaking headlines in the EV space.
Through its subsidiary Tembo e-LV, vivopowerdevelops and distributes conversion kits with all the parts requiredto convert a vehicle from an internal combustion engine to an EV.These include the motors, batteries, transmission, charger, software,and the rest of the components that make the converted vehiclework.
Tembo’svalue proposition here is that users will incur lower maintenance andoperational costs, less downtime, and won’t have the need forexpensive fuel infrastructure.
This unique approach to electrifying vehicles hasshown massive potential since it's much more cost-effective thanoutright buying a new one. To better illustrate this, VivoPowerInternational (NASDAQ:VVPR) recently secured an order commitmentof more than 5000 kits (1,000 for Jordan and 4,000 for Kenya) and anorder pipeline of another 10,000+ kits.
What’s most exciting about these orders isthat they could be just the tip of the iceberg. Jordan offers theperfect entry point to the Middle East EV market, which expertsproject will grow at a CAGR of about 28.9% till 2030. The Middle Eastis also the world’s largest landcruiser market, which is perfectlysuited for Tembo's conversion kits. On the other hand, Kenyaprovides vivopower with the means to establish a foothold in thesecond-hand vehicle conversion market, which some estimate has a valueof about $2 billion.
Although VivoPower International's (NASDAQ:VVPR) entry into the EV market has already rewarded a number of earlyshareholders with triple-digit returns, the stock appears to stillhave room for further upside based on a number of catalysts.
For starters, thecompany recently announced that Tembo would go public via a mergerwith Cactus Acquisition Corp. 1 Limited (CCTS), a NASDAQ-listed SPAC,and change its name to Tembo Group. According to the details of thetransaction, CCTS will issue 83.8 million shares at $10 per CCTS sharein exchange for Tembo shares, which implies a valuation of $838million. In addition to that, a bonus of 16.76 million Tembo DividendShares will be distributed to VivoPower shareholders, who will receive5 Tembo Group shares for each VivoPower share held.
Assuming a conservativeIPO price of just $1 per Tembo share instead of $10, it would meanthat VivoPower International (NASDAQ:VVPR) shares are worth atleast $28 each.
While that potential upside may appear too good to be true, itis further supported by the fact that Vivopower received a directinvestment of $5 million into Tembo at a pre-money valuation of $120million from a private investment office of a member of the ruling AlMaktoum family of Dubai. For context, Vivopower currently has a marketcap of just $12 million.
That investment not only reaffirms investor interest in theMiddle East and Africa’s EV market but also in vivopower’slong-term growth prospects. Furthermore, the company recentlyannounced that executive chairman and CEO Kevin Chin increased hisindividual shareholding in the company by 146,084 shares (about 4.4%of the outstanding shares) to increase his shareholding to12.3%.
Goingforward, VivoPower International (NASDAQ:VVPR) will build onits initial success in the Middle East and Africa to continue its Asiaexpansion after signing a definitive joint venture agreement withFrancisco Motor Corporation to develop and supply electric utilityvehicle electrification kits for a new generation of electric jeepneys(e-jeepneys) in the Philippines.
Li Auto (NASDAQ:LI) designs, develops,manufactures, and sells premium smart electric vehicles. TheChina-based EV maker has clearly been the strongest performer recentlyin the lackluster EV space. Li Auto remains by far thefastest-growing, well-established EV maker out there.
The company recentlylaunched the Li L6, a five-seat premium family SUV that will offer Proand Max trims in spite of the recent weakness in the market, signalingthat the long-term fundamentals still remain strong.
In the meantime,however, Li Auto has resorted to price cuts to deal with the softeningdemand. The car maker announced price cuts for four out of the fivemodels it produces. We're talking about roughly 5% of the existingsale price, or about $4,100 off of what it's selling for rightnow.
The pricecuts came as new data showed that, for the first time, China sold moreelectric and hybrid cars than internal-combustion vehicles. Retailsales of new-energy cars, which include EVs and plug-in hybrids, madeup 50.4% of all passenger-vehicle sales in the first two weeks ofApril, according to data from the China Passenger CarAssociation.
Lirecently reported full-year 2023 earnings, where revenue grew animpressive 173.5% year-over-year to reach $17.2 billion. The companyis projected to deliver 57% top-line growth in 2024, with consensusestimates calling for $27 billion in sales this year. Citigroupmaintains a buy rating on Li Auto stock with a $43.60 price target.
Emeren GroupLtd. (NYSE:SOL) is a renewable energy leader with a comprehensiveportfolio of solar projects and independent power producer (IPP)assets, complemented by a significant global battery energy storagesystem (BESS) capacity.
The company recently announced a number of milestones,including that it had signed a co-development agreement for 199 MW (upto 1.59 GWh of capacity) of battery storage projects in two regions ofsouthern Italy with Nuveen Infrastructure, one of the world'slargest fund managers investing in clean energy. This agreement marksthe final stage in the portfolio collaboration between Emeren andNuveen, achieving a total power capacity of 354 MWp (up to 2.83GWh).
SOL alsoannounced that it had set up a 703 megawatt BESS project portfolio inItaly for Matrix Renewables under the Development Service Agreement,or DSA, which, combined with the previous sale of the 260 megawatt inQ2, amounted to a total of 963 megawatts of BESS projects. This markeda substantial advance towards the agreed portfolio target of 1.5gigawatts in the DSA partnership with Matrix.
The company alsoannounced the expansion of its energy storage portfolio in China byacquiring a 10.8 megawatt-hour energy storage portfolio comprising sixenergy storage power stations. According to its most recent filings,SOL closed FY 2023 with $104.7 million in revenue, a 22.2% grossmargin, and a $9.3 million net loss. These results were below ourfull-year guidance, primarily due to the delays in closing the salesof six projects in the US and Europe.
FREYR Battery, Inc. (NYSE:FREY) develops clean, next-generation battery cell production capacity witha focus on the primary markets of energy storage systems("ESS") and commercial mobility.
Last month, FREYR’s team at its CustomerQualification Plant ("CQP") reached a key milestone byproducing automatically casted electrodes with active electrolyteslurry in a dry room environment, and the company expects to makefunctional battery cells for customer samples using full automation ofCQP in H1 2024.
Akey distinction between FREY’s production platform and conventionallithium-ion battery manufacturing technology is the order in whichelectrolyte is introduced to the process. In the 24M process,electrolyte is added at the start of cell processing, which eliminatesthe costly and energy-intensive step of solvent recovery by drying theelectrodes.
Thatmilestone follows another key achievement by the company, whichannounced that the U.S. Department of Energy (DOE) had invited thecompany to submit the Part II loan application under the DOE Title 17program for FREYR’s Giga America project.
"The Part II DOEloan application invitation is an important next step in FREYR’sjourney to fund our Giga America project," commented Birger Steen,FREYR’s Chief Executive Officer. "With our redomiciliation tothe U.S. now approved by our shareholders, FREYR is uniquelypositioned to establish the Company as the U.S.-basedindustrialization partner of choice for clean battery technologysolutions.”
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