Summary
- A robust EV charging infrastructure is needed to support the adoption of EVs, which benefits WBX.
- WBX's user-focused philosophy and approach differentiate it from the pack.
- WBX's strategic partnerships ensure sound distribution.
Description
I believe Wallbox ( WBX ) is worth $39, representing a 5x upside from the date of writing. To me, several strong secular trends within the EV industry bode well for WBX's continued growth, as do the company's user-focused approach and strategic partnerships. Most importantly, we need WBX to execute as planned.
Company overview
Wallbox makes electric vehicle charging systems that let the user, car, power system, building, and charger communicate with each other. The purpose of Wallbox is to make it easier for customers to purchase electric cars now so that we can use energy more sustainably in the future. In essence, Wallbox is building the infrastructure that a large number of EV owners need to meet their needs.
Rise of electric vehicles adoption
An increased interest in the energy transition, coupled with falling manufacturing costs, has hastened the electrification of the transportation sector around the world. A quick Google search will indicate that there will be many more electric vehicles (EVs) in the future than there are now. I think that the leading causes for this increase are the responses to COVID-19 from distinct stakeholders, more government funding, modifications in the unit economics of batteries, and growing commitments from automakers. In 2021, EV sales set a new international record by selling more than 6 million cars, and since the EV market is expected to grow a lot in the next few years, I expect this record will soon be broken.
More and more cars are becoming electric, largely because the government helps EVs and charging stations with money and laws. The European Green Deal plans to invest at least €1 trillion in the continent's climate-neutral and circular economies. It is just one of many regulatory support programs worldwide that will boost the sector significantly. Overall, these commitments should make a big difference in meeting the goals of the Paris Agreement to cut CO2 emissions, which are to reduce emissions by at least 55% in Europe by 2030.
Also in the US, the Biden government has promised to invest USD 174 billion in electric vehicles. This includes grant and economic benefit initiatives for state and local governments, sale price reductions, and consumer tax incentives. This money will make the charging stations much better across the country.
A robust EV charging infrastructure is needed to support the adoption of EVs
The global EV charging network will need to increase its capacity to accommodate this shift to EVs, creating a sizable TAM for EV charging infrastructure of USD 102 billion by 2030. (in line with WBX F-1). In order to facilitate the widespread adoption of electric vehicles, management estimates that approximately 93 million chargers will be needed worldwide by 2030, at a total investment of more than $224 billion.
WBX is well-positioned to capture a decent size of the pie
Wallbox is a full-service EV charging solution provider that provides its own proprietary hardware, software, and services. In addition, the chargers are all linked together invisibly by WBX's enterprise-grade software platform. Through MyWallbox and Electromaps, Wallbox has successfully managed millions of charging sessions. Even better, Wallbox is able to keep its profit margins high because it has some of the most cutting-edge features available (such as Bluetooth and gesture control).
User-focused philosophy approaches differentiate WBX from the pack
Wallbox has a unique, customer-focused approach to the market. It started out in the residential market, where it built a strong and appealing brand, and then moved into the commercial and public sectors.
Wallbox is in a unique position to help EV drivers across the board in regards to EV charging, as there are only a handful of companies worldwide offering such services. Since Wallbox handles every step of the process in-house, from conceptualization to production to certification, the company can quickly adjust to changing market conditions and respond with a product that appeals to customers all over the world. Wallbox's fast DC chargers, EMP solution, and other smart charging solutions have positioned the company to become a market leader.
Wallbox stands out in the electric vehicle charging market thanks to its consumer-centric product offering. Wallbox is an electric vehicle (EV) charging station that, unlike many more traditional industrial-type EV charging products, focuses on making small, attractive products that are easy for customers to use at every stage of the product's life cycle (buying, installing, and using).
Strategic partnerships ensure sound distribution
Wallbox has built and maintained strong, long-term relationships with a broad range of partners so that it can sell to a wider range of clients and regions.
Wallbox receives significant funding from utilities and automakers like Nissan and Mercedes, as well as Iberdrola. In June of 2021, Iberdrola announced its intention to acquire the first 1,000 Wallbox Supernova fast chargers as part of its five-year sustainable mobility plan to deploy more than 150,000 chargers in homes, businesses, and public road networks. In July 2021, Iberdrola entered into a non-binding letter of intent with Wallbox, expressing its interest in purchasing 6,500 Supernova chargers through 2022 (source: S-1).
Valuation
I believe WBX is worth USD39 in FY26, representing a 5x upside from the date of writing. I would like to point out that the upside seems significant from today's price, but the stock did trade up to $27 post the SPAC merger.
This value is derived from my model based on the following assumptions:
- Revenue growth will follow management guidance until fiscal year 27 and will be supported by continuous execution of its growth plans.
- I assumed WBX will trade at 2.5x forward revenue in FY26. This is derived from benchmarking against Tesla ( TSLA ) valuation. I agree that they are not the best comp as they have different business models, but WBX is a derivative of EV adoptions, which makes TSLA valuation a good indicator of where WBX could trade at. TSLA is currently trading at ~6x forward revenue and is expected to continue growing at high rates profitably. I assumed a discount to that as WBX is expected to grow slower, has a lower revenue base, and is likely not going to be meaningfully profitable in FY26.
Key risks
WBX is still in its development stage
The truth is that WBX is currently losing money. While it is expected that profitability will happen in the future, as directed by management, there are no guarantees. Given the current macroenvironment, many investors are looking for profitable companies, so WBX may see very little capital inflow to drive the stock higher.
EV adoption may not be as mainstream as expected
Wallbox's growth and success depend on how quickly EVs are adopted and how much people want them. Changes in fuel economy standards, the success of alternative fuels, or government, utility, and other financial incentives to pay for the costs of buying or servicing EVs and EV charging technology could hurt the EV market and, as a result, demand for Wallbox's goods and services.
Summary
WBX is undervalued at its current share price as of the date of this writing. I could see several strong long-term trends in the EV industry that could keep WBX growing, and WBX's user-focused approach and strategic partnerships put it in a good position to succeed.
For further details see:
Wallbox: An Indirect Way To Benefit From Rise Of EV Adoption