2023-03-06 03:08:39 ET
Summary
- Polestar reported Q4'22 results last week.
- The electric vehicle company could achieve profitability within 2 years.
- Polestar’s FY 2023 delivery guidance is truly impressive.
Electric vehicle start-up Polestar ( PSNY ) reported earnings for FY 2022 and the company reported an impressive 84% year over year increase in revenues. Additionally, Polestar submitted a very strong production forecast for FY 2023. With production targets in the EV sector disappointing big time in FY 2022 due to supply chain issues and slowing economic growth, I believe that Polestar is really standing out in a positive way. The EV company could achieve profitability within two years and Polestar could see a major upside revaluation of the EV maker’s shares if it continues to execute well on the delivery front in FY 2023!
Polestar sees strong revenue growth and is guiding for a significant production/delivery ramp
Polestar reported revenues of $985.2M for the fourth-quarter which showed 67% year over year growth. Total revenues in FY 2022 grew to $2.46B, showing an increase of 84% as Polestar made massive progress in ramping up Polestar 2 production and deliveries. Polestar said that it is preparing to launch a facelifted version of the popular Polestar 2 sedan in FY 2024 which would then offer technological improvements, a fresher look and up to 300 miles of range.
Polestar not only reported a strong revenue position thanks to the Polestar 2, but the company's financial statements also showed a narrowing of losses. Polestar still lost about $465.8M on $2.46B in revenues, but the company could be on track to achieve profitability in the next two years... if revenues continue to ramp up as they did in FY 2022.
Source: Polestar
FY 2022 delivery accomplishments and FY 2023 forecast
In FY 2022, Polestar delivered 51,491 electric vehicles globally, showing an increase of 80% year over year due to strong demand for its Polestar 2 electric vehicle, the company's flagship EV. The delivery volume beat Polestar’s delivery guidance of 50 thousand units by 3%. Last year, Polestar entered new markets and expanded its retail footprint as international expansion is a key element of the company's growth strategy. Last year, Polestar added new markets in Europe such as Ireland, Portugal and Spain, but also expanded to Middle Eastern countries such as the United Arab Emirates and Kuwait. By the end of FY 2023, Polestar expects to have a presence in at least 30 countries.
Source: Polestar
Polestar also reaffirmed that it expects to complete 80,000 thousand deliveries in FY 2023 which is consistent with the company’s earlier forecast from January. An 80,000 delivery volume implies 55% year over year growth which is an impressive number for an EV start-up.
Polestar is the second electric vehicle start-up that massively surprised to the upside with its delivery guidance for the current fiscal year. Fisker ( FSR ) last week said it expects to produce 42,400 electric vehicles in FY 2023 which I argued in " Fisker: Inflection Point " is not only a milestone achievement, but also a catalyst for an upside revaluation.
Polestar’s valuation
It seems to me that the businesses that impressed the most with their production and delivery goals for FY 2023 are those EV companies that haven’t received all that much attention from investors lately. Usually, investors seem to be more interested in cashed up, high-profile EV companies like Rivian Automotive ( RIVN ) and Lucid Group ( LCID ). But this could also be an opportunity for EV investors.
Polestar is expected to grow revenues 53% in FY 2023 and 170% in FY 2024 as the company continues to execute on its expansion plan. Polestar, based off of FY 2024 revenues, has a P/S ratio of only 1.08 X which undervalues, in my opinion, Polestar's delivery and revenue ramp.
Source: Seeking Alpha
Other US-based EV manufacturers trade at significantly higher P/S ratios and many of them are not expected to be profitable any time soon -- Polestar is expected to be profitable by FY 2025 based off of consensus EPS estimates . Polestar's valuation is about as cheap as Fisker (P/S ratio of 1.04 X) and I see both companies as undervalued given their revenue potential.
Risks with Polestar
Polestar is an up-and-coming Swedish electric vehicle company which has found great market success with his first-ever production car, the Polestar 2, but the EV company is a start-up and faces considerable ramp up risks nonetheless. Additionally, Polestar has said that it is going to broaden its product portfolio by launching the Polestar 3 SUV... which was already introduced last year. As an EV start-up, Polestar faces significant production and timeline risks and falling short of the company’s FY 2023 delivery target would likely lead to a lower valuation factor.
Final thoughts
It seems to me that the market has been overly focused on larger EV companies such as Rivian and Lucid, both of which have made a splash in the market with their first electric vehicle products. However, I believe there are a couple of smaller EV companies that are interesting for investors as well, especially because companies like Rivian and Lucid have recently disappointed with their delivery forecasts for FY 2023. Fisker and Polestar, on the other hand, have presented impressive delivery projections for the current year. Since Polestar is cheap with a P/S ratio of 1.08 X, just like Fisker, I believe the risk profile for the EV company's shares is attractive!
For further details see:
Polestar: Impressive FY 2023 Guidance