What You Missed This Week in EVs and Clean Energy

Jefferies cuts Tesla to Hold, CEO Musk ordered to be interviewed on Autopilot statement

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

MOVING TO THE SIDELINES: 

On April 25, Jefferies downgraded Tesla to Hold from Buy. The company’s strategy of growth over margin has its “logic and resets expectations,” but also poses a question whether its profit edge was structural or a timing difference, the firm tells investors in a research note, also stating that its Q1 results did not validate demand elasticity offsetting lower prices. Cost progress may take longer to materialize, and pending Tesla’s reset of performance and possibly governance, a Hold rating is warranted, Jefferies added.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

AUTOPILOT STATEMENT: 

A California judge has ordered Tesla CEO Elon Musk to be interviewed under oath to determine if he made certain statements regarding the safety and capabilities of the company’s Autopilot features, Hyunjoo Jin and Dan Levine of Reuters reports. The ruling came from a lawsuit by the family of Walter Huang against Tesla over a car crash that killed Huang back in 2018. Tesla’s lawyers have made the argument Musk cannot recall the statement the plaintiffs want to asked about and the CEO is often the subject of “deepfake” videos. Musk will most likely be asked about the following statement he allegedly said in 2016: “A Model S and Model X, at this point, can drive autonomously with greater safety than a person. Right now.

GM ‘OVERSOLD’: 

On Monday morning, Morgan Stanley upgraded General Motors to Overweight from Equal Weight. General Motors “may be overearning, but the stock is oversold,” contends the firm, which argues that the market has sufficiently discounted the challenges to making money in EVs while underappreciating the slow-melting internal combustion engine vehicle free cash flows and GM’s improved capital discipline.

BREACH OF INVESTMENT AGREEMENT: 

Lordstown Motors (RIDE) disclosed that on April 21, it received a letter from Foxconn asserting that the company was in breach of the investment agreement due to its previously disclosed receipt of a notice from the Nasdaq indicating the company was no longer in compliance with the $1.00 minimum bid price requirement for continued listing. Foxconn purported to terminate the investment agreement if the breach is not cured within 30 days. Foxconn has notified Foxconn that it believes the breach allegations in the notice are without merit. The investment agreement, by its terms, does not permit Foxconn to terminate it following the initial closing, and in any event, Foxconn cannot exercise termination rights because Foxconn has breached the investment agreement by failing to use necessary efforts to agree upon the electric vehicle program budget and EV program milestones to facilitate the funding of the additional preferred stock investment, Foxconn said in a filing. Therefore, the company believes the investment agreement remains in effect and intends to enforce its rights thereunder.

Lordstown said it is in discussions with Foxconn to seek a resolution regarding these matters. However, to date, Foxconn has declined to revoke its “invalid” termination notice and has failed to confirm that it will proceed with the subsequent common closing or any preferred stock closing, it added. If the closing and funding do not occur, the Lordstown said it “will be deprived of critical funding necessary for its operations.” The company is evaluating its legal and financial alternatives in the event a resolution is not reached.

It added, “IF we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain.”

APRIL DELIVERIES: 

Nio (NIO) announced it delivered 6,658 vehicles in April, representing an increase of 31.2% year-over-year. The deliveries consisted of 1,713 premium smart electric SUVs, and 4,945 premium smart electric sedans. Cumulative deliveries of Nio vehicles reached 327,255 as of April 30. In April, the majority of deliveries were attributable to ET5 and ES7, while Nio has been upgrading its product offerings from Nio Technology 1.0 to Nio Technology 2.0. In late April, Nio started to steadily ramp up the production and delivery of the EC7, a five-seater smart electric flagship coupe SUV from NT2.0.

Meanwhile, Li Auto (LI) announced that the company delivered 25,681 vehicles in April, setting another monthly record, while exceeding the 20,000 delivery mark for the second consecutive month and representing an increase of 516.3% year over year. The cumulative deliveries of Li Auto vehicles reached 335,599 as of the end of April.

XPeng (XPEV) also announced its vehicle delivery results for April. In April, XPeng delivered 7,079 Smart EVs. Launched in March, the new P7i sports sedan continues to gather order intake momentum. The company is significantly ramping up production which will accelerate customer deliveries of the P7i in the near future.

BUY LUMINAR: 

Jefferies initiated coverage of Luminar Technologies (LAZR) with a Buy rating. The firm says the ramp of the company’s high-volume manufacturing facility in the second half of 2023 to ship to Volvo will serve as a near-term catalyst for the stock. Jefferies views Luminar as best positioned to capture a dominant share of the nascent lidar market.

STRATEGIC PARTNERSHIP: 

Shoals Technologies (SHLS) and Brookfield Renewable (BEP) announced a strategic partnership to introduce a Charging-as-a-Service, CaaS, solution for electric vehicle, EV, charging infrastructure. This new product offering eliminates large up-front payments and enables streamlined deployment of charging networks for fleets, retail, multi-unit dwellings, and other large commercial properties, the companies said.

DEMAND HEADWINDS: 

BofA downgraded Enphase Energy (ENPH) to Underperform from Neutral, following the company’s “disappointing” Q1 results. Given the after-hours move lower in the stock, the firm expects some investors to argue that the worst “has already washed out.” However, BofA disagrees with that view, as it sees headwinds to near-term growth being bolstered by weak sell through trends in the distributor channel and thinks demand headwinds are likely to “linger.”

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Originally Posted May 1, 2023 – What You Missed This Week in EVs and Clean Energy