2023-10-05 21:41:02 ET
Summary
- Wallbox N.V. has seen a rapid decline in its share price as the market shifts focus to other sectors with positive profit margins.
- WBX is a technology firm specializing in innovative charging solutions for EVs, but its lack of profitability limits its investment potential.
- WBX operates in the AC charging, DC charging, and Software and Services segments, but faces competition from industry giants like Tesla and Schneider Electric.
Investment Rundown
Wallbox N.V. ( WBX ) has seen its share price fall quite rapidly over the last few months as the market seems to shift its focus to other sectors where profit margins are positive. In the case of WBX, it has been hyped up over the last few years as the push towards green energy and renewables rose quickly. I think that the company is interesting, but from an investment standpoint, it offers quite little right now, unfortunately. The market has like I said shifted sentiment on the company it seems and it now has nearly 10% short interest. I think this will add further weight to the share price and ultimately lead to it declining more. I don’t see the value in investing here in the short term as the margins remain lackluster. WBX gets a sell from me.
Company Segments
WBX is a technology firm, that specializes in the conception, production, and dissemination of innovative charging solutions tailored for residential, commercial, and public applications. Wallbox operates across three distinct segments: Europe-Middle East Asia, North America, and Asia-Pacific, enabling its global presence. The company's product portfolio encompasses an array of EV charging hardware, including the highly acclaimed Pulsar Plus – an advanced AC smart charger designed for seamless integration within homes or multi-family residences.
Much of the appeal that comes with WBX is that it offers a massive opportunity to shift and push toward EV and green energy. The company offers EV chargers as we have discussed and the market growth present there is very appealing to some. But that isn't to say all companies working in it is by any means a good investment. Being unable to generate a profit leaves little potential value to shareholders.
Markets They Are In
Currently, WBX's portfolio is predominantly oriented towards AC charging, constituting a substantial 70% of its total revenues. The remaining segments are fairly evenly split between DC charging and Software and Services, highlighting the company's diversified approach to the EV charging market. In the industry landscape, the DC charging sector still commands a significant share, accounting for 43.6% of the market.
WBX's competitive challenge lies in contending with industry giants like Tesla ( TSLA ) and Schneider Electric (SBGSF). These corporate behemoths boast significantly larger budgets, providing them with substantial resources to navigate the complexities of emerging markets. Wallbox's growth strategy hinges on its ability to efficiently penetrate these new and evolving markets and gain a competitive edge over its more prominent rivals. While the odds may seem daunting, WBX's innovative solutions and global reach could position it strategically for success in the dynamic EV charging sector.
Risks
Profit margins are a crucial factor to keep an eye on when assessing WBX prospects. It's worth noting that the company's path to profitability isn't projected until 2026. Any unforeseen setbacks or delays in achieving this milestone could introduce uncertainty into the market, potentially resulting in a notable decline in WBX stock value. Without a positive net margin, WBX's valuation is heavily influenced by factors beyond its fundamental financial performance. This reliance on non-profitability metrics could impact investor sentiment and share price stability.
Apart from the margin-related apprehensions, the electric vehicle charging sector is characterized by intense competition. WBX currently maintains a relatively modest market share when compared to industry giants like ChargePoint Holdings Inc ( CHPT ) which holds a commanding 65% share of the charging solutions market in the United States.
Nonetheless, WBX may possess a competitive edge stemming from its diversified market presence. While the American market represents the largest and most rapidly expanding segment, WBX's global footprint positions it advantageously for generating revenue across multiple regions. This extensive market reach could significantly bolster the company's prospects for success.
Financials
Looking at the asset side of the balance sheet of WBX it has been rather stagnant over the last few months. It has increased by around €20 million since December 31, 2022. The increase comes mostly from higher intangible assets and tax credit receivables. Going into coming reports I will be looking for a growth in the cash position instead to get some more financial flexibility for the company.
Dilution has been common with WBX over the last few years and I think it will continue to be as long as the net income remains negative for the business. For instance, the shares were at 91 million in 2020 and has grown to over 170 million now. If WBX is not able to generate a profit, it will need to pay down liabilities with capital gained from issued shares instead. The current loans have increased for the business since December 31, 2022, and are now at €66 million. The current assets can cover this, but using it will hurt their financial position obviously as they can't fill it back up with earnings. For WBX to raise €66 million they would need to issue around 15% more shares, and given the track record they have I think this is highly likely in the next 12 months. As we have seen the shares outstanding has increased rapidly as a means for WBX to raise capital. This will of course lead to more pain for shareholders and I can see a further 15 - 20% drop in share price happening from here on out.
Final Words
Right now I think that WBX looks good in the long run perhaps, given the sheer amount of demand and serviceable customers that exist in their market. But that doesn't matter if WBX can't turn a profit. So far the bottom line hasn't displayed the improvements I have been looking for and will be rating it a sell.
Just looking at the p/s of the company it sits at a premium to the rest of the market at over 42%. It may be declining on an FWD basis, but it still exhibits too much of a premium in my opinion. I would be more interested at a p/s of around 1.2 - 1.3 instead, making WBX a sell right now given the downside risk I see from the premium and the risk of further dilution. Why I would attribute this lower multiple comes down to WBX not exhibiting some of the qualities I seek, like no dilution, and solid margins, like a profitable bottom line for instance. A lower multiple then the sector, or just in line would likely make broader market selloffs less effective on WBX if the multiple is within that range. I find there to be too much room to fall when it's trading at a premium like this.
For further details see:
Wallbox: Need Rapid Improvements Before Suggesting Something More Positive