2023-04-28 08:45:11 ET
Summary
- Wallbox N.V. has been able to grow revenues at an incredible rate thanks to the demand seen for charging solutions across many markets.
- The future looks bright for the company and they estimate 2023 to yield a 100% increase in revenues.
- Despite this momentum, I can't bring myself to rate them a buy until I get a better picture of when they will have a profitable bottom line.
Investment Summary
Wallbox N.V. ( WBX ) had a very strong 2022 when a lot of other companies had the opposite. They operate worldwide and offer customers charging solutions that they themselves design, manufacture and distribute. Some of the notable products are the Pulsar Plus, an EV charging hardware.
In 2022 the company managed to double its revenues from 2021 levels, along with opening two new factories. Despite this large revenue growth the company is yet to have a profitable bottom line, as is often the case with new companies like WBX. Because of the slight uncertainty I feel as to when the bottom line might finally be positive, I will rate them a hold. Until the company is trading based on positive EPS, I can't make a buy case for it, but will keep a close eye nonetheless.
Market Momentum
Looking at the market that Wallbox is in, the energy management industry is expected to continue seeing a lot of growth on a yearly basis. In a report by mordorintelligence they predict the market to experience a 15.65% CAGR 2017-2027. Much of this growth is driven by a steadily increasing energy demand, especially among industrials. The report also mentions a study where buildings on average wasted around 30% of their energy. Wallbox focuses on charging infrastructure and this will primarily be where they generate most of their revenues. In a presentation by the company, they expect the TAM for charging infrastructure to be around $102 billion by 2030. They also estimate that 97% of all charging installations lie ahead.
Market Outlook (Investor Presentation)
I think this projection goes in line with the 2023 outlook the company also has. They estimate they will have a YoY growth of around 80% for 2023 with revenues being around $240 - 290 million. For the next quarterly report the company is also estimated to have around the same margins as in Q4 2022, which I don't necessarily think is a bad thing, but moving forward it will be vital to actually see a margin improvement to help prevent the need for share dilution of any sort.
Quarterly Result
The last quarter for Wallbox was full of momentum. The company kept up the rapid revenue growth and achieved 44% YoY growth, totaling $37 million in the quarter. One major achievement was the increase in sales in North America, increasing 425% from last year's numbers.
Report Highlights (Earnings Report)
Looking at the whole year the company has made some significant steps to secure its share of the market and pave the road for more growth. In 2022 the company opened two new factories and sold more than 230 000 chargers worldwide.
For the year the gross margins were in focus and I think the company delivered. For 2022 despite the difficult economic environment for most companies, Wallbox grew gross margins to 40.5%, up from 38.2% in 2021. I think this is setting the tone that the company will one day be able to achieve a profitable bottom line. According to some estimates that might be in 2026, which isn't that far off to be fair. With a lot of growth still left to be had for the industry, I would expect the revenues for Wallbox to continue growing at a similar yearly rate as they have done right now. I think going forward the focus should lie on the margins and how they are improving for the company. Demand will be there but it will be vital for the company to leverage this demand and actually run a profitable business too.
Risks
One of the risks I see with Wallbox is the margins. I mentioned before that the bottom line isn't expected to be profitable until 2026. If there are any hiccups along the way and that year gets delayed, then I think we will see a major contraction in the share price to reflect that uncertainty. Without a positive net margin, the company is not trading on fundamentals and therefore has nothing to fall back on.
Besides margins, competition in the charging space is very fierce. Right now Wallbox does not hold a major part of the market. ChargePoint Holdings Inc ( CHPT ) is a major player in the space and according to them holds around 65% of the market share for charging solutions in the United States. What I think might bring Wallbox a slight edge is the more diversified market they have. They don't solely focus on the American market, even though that is the faster growing and largest one. Instead, they have an international presence lending them the ability to still generate revenues quickly.
Valuation & Wrap Up
Looking at the valuation of Wallbox, they are obviously trading at a negative p/e seeing as the bottom line is not yet profitable. Looking at the p/s however the TTM being 2.94 is quite high, but it is significantly lower using the forward p/s, around 1.66. I think that this highlights some of the momentum expected for the company and then the current price doesn't look too bad.
Stock Price (Seeking Alpha)
Using the EPS estimate of around $0.1 per share in 2026 the current price would mean the company trades around 27x earnings which isn't extreme given the growth it has and still expects to have. Using the 2027 EPS estimate the multiple would instead be around 17 which would be incredible to pay for accompanying growing revenues of around 50-60% each year.
On May 4th the company will also be reporting and I think it will be crucial to see how the margins have been kept up. The company noted in the last report they expect no increase in gross margins for this quarter, a surprise upwards could be a catalyst for the stock price, whilst a decrease could be a major setback in my opinion. I think getting some more clarity on orders and the demand will also be important for investors and something I will be watching out for.
What makes me still keep a hold rating for the company is the unprofitable bottom line. I don't like speculating too much with unprofitable companies. I rather get in a little later when margins are positive. I think Wallbox has a very promising future and I will keep an eye on the quarterly reports to get an idea of whether 2026 is the year the company achieves profitability or if it's earlier.
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Wallbox Has A Very Promising Future, But Doesn't Equal A Buy