August Update: CHPT, PFE, TPGY
EV manufacturers are tumbling. Pfizer broke a 20-year record.
Good morning, investors!
Today, we’re going to check in with a few of the stocks we’ve covered: ChargePoint, Pfizer, and EVBox.
If this is your first time with us, feel free to subscribe here. If you enjoy today’s newsletter, please hit the heart button at the end of the report.
Without further ado…
On June 11, we released our ChargePoint Due Diligence report. If you recall, we viewed ChargePoint as a risky short-term play. At the time of release, CHPT traded for $28.07. As of yesterday’s close, CHPT is down to $21.36.
EV stocks have taken a beating over the last few months — broadly due to a pullback on steep valuations. Keep in mind, EV manufacturers and EV infrastructure companies don’t generate a ton of earnings yet (relatively speaking, of course). ChargePoint generated $146.5 million of revenue in FY20; the company expects revenue to land between $195 - $205 million this year. Nevertheless, ChargePoint’s market cap is $6.9 billion.
To give you an idea of how that stacks up against an arbitrary company, Ralph Lauren Corp did $1.4 billion of revenue last quarter — and their market cap isn’t proportionately higher at $8.6 billion. Not even close.
That shows how jazzed up the world is about EVs.
Beyond the general retreat for EV stocks, ChargePoint also issued more shares, which didn’t help matters.
On July 12, ChargePoint announced its plan to issue an additional 12 million shares. Investors generally don’t like that, even when the proceeds go toward something useful like acquisitions or general capital expenditures — because it dilutes existing shareholder value. In this case, “certain stockholders” received all of the proceeds. Investors tend to really not like that. The issuance was priced at $23.50 per share, well below its stock price at the time ($28.84).
Naturally, CHPT took a beating shortly thereafter. But seven out of eight analysts still rate ChargePoint a “buy.” The average price target sits at $36 per share.
Things working in ChargePoint’s favor
However, there have been positive developments too.
On July 20, ChargePoint signed a definitive agreement to acquire has·to·be (what an odd company name), an e-mobility provider with a leading European charging software platform.
Founded in 2013, has·to·be has 125 employees in Austria and Germany, as well as approximately 40,000 networked ports and over 250,000 networked ports through open roaming agreements.
On August 11, ChargePoint acquired ViriCiti, an eBus and commercial vehicle management provider, to help accelerate fleet electrification over the next decade
Founded in 2012, ViriCiti today has more than 50 employees in the Netherlands and United States, and established market share in North America and Europe with approximately 150 fleet operators, 3,500 connected vehicles and 2,500 networked ports under management.
Lastly, and more importantly, earlier this month, a bipartisan group of senators hammered out the details of a $1 trillion infrastructure package, of which roughly $7.5 billion would be earmarked for electric charging stations. The House has until September 27 to vote on the bill.
Keep an eye out for the vote’s results as well as Chargepoint’s upcoming earnings announcement for Q2, which will take place on September 1.
Can you believe it? The biopharmaceutical behemoth’s share price finally experienced some upward momentum.
On May 14, we released our Pfizer Due Diligence report — we thought PFE was a safe long-term play. At the time of release, PFE traded for $40.10 As of yesterday’s close, PFE is up to $47.38.
The initial catalyst was strong Q2 earnings results. On July 28, Pfizer announced that non-vaccine revenue grew 10% year over year — plus, it raised full-year EPS guidance to $3.95 - $4.05 per share, which was significantly up from its previous expectation of $3.55 - 3.65.
It’s been tough for analysts to value the COVID-19 vaccine aspect of Pfizer’s business because the jury is still out on whether this source of cash flow will be recurring (for the sake of humankind, hopefully not). In other words, will COVID be an indefinite issue that warrants constant vaccinations? If so, Pfizer will continue to make a fortune.
On August 10, Reuters reported that Pfizer had hit a record high for the first time in over 20 years. (It peaked at $51.86 on August 17.) Here’s a snippet from the article that quotes one portfolio manager’s opinion:
“I think they are finally getting credit for the vaccine," said Jeff Jonas, a portfolio manager at Gabelli Funds, which owns Pfizer shares.
While investors had treated the vaccine before as "a one-time cash infusion ... it is really going to be a durable business, unfortunately," Jonas said, adding that Pfizer should be able to leverage the vaccine's technology for use against other types of disease as well.
As icing on the cake, Pfizer’s vaccine (BNT162b2) received full approval from the FDA on August 23 — the first COVID-19 vaccine to do so. Since the announcement, Pfizer investors have seemingly cashed in on this news, considering shares of Pfizer are down 6.6% since the approval.
Analysts collectively view PFE as a “hold” with an average price target of $45.32.
On April 2, we released our EVBox Due Diligence report — we suggested a “wait-and-see” approach. At the time of release, TPGY traded for $20.31 As of yesterday’s close, TPGY is down to $10.30.
Of course, TPG Pace Beneficial Finance Corp (the SPAC that’s presumably going to merge with EVBox) has — like the rest of the industry — experienced a significant pullback. But there’s more to this story.
Well, more of the same that is.
We recently covered TPGY’s tumble in an issue of Market Movers; here’s what we reported:
In May, TPGY officially notified investors that EVBox is taking longer than expected to complete an audit of its FY20 financials. Who knows what the hold-up is, but a delay is not a good sign.
On June 1, TPGY released another official announcement, which stated that the companies had agreed to extend the original outside date from June 8, 2021 to August 6, 2021. If the deal still hasn’t closed by then, either company is free to terminate the agreement. In other words, the proposed business combination could fall apart.
Well, it’s August 26, and EVBox still hasn’t delivered its FY20 audit to the folks at TPG Pace Beneficial — a prerequisite of the proposed business combination.
On August 6, through a current report (8-K), TPG and EVBox announced the extension of the outside date to December 31, 2021. Within the report, TPG shared that it had received information indicating that EXBox’s existing FY19 audited financials might require restatement prior to the completion of FY20’s audit. As a result, EVBox has to provide a revised business plan and financial forecast.
The report continues (emboldened for emphasis):
As a result of the foregoing, TPGY does not consider the previously released financial and operating guidance for EVBox Group for future periods to be reliable indicators of EVBox Group’s expected future financial performance (specifically, the financial and operating guidance filed by TPGY as part of its Current Report on Form 8-K filed on December 10, 2020 or any subsequent reproductions of such guidance).
That’s not exactly a peachy prognosis. I guess we’re still “waiting and seeing.”
I feel bad for the auditors charged with helping EVBox prepare its financials. By the time they finish FY19’s and FY20’s audits, they’ll have to turn around and do this year’s audit.
What a world.
Shares of TPGY closed at $10.30 on Thursday, well below its 52-week high of $34.28.
Thanks for reading. Don’t forget to hit the heart button if you enjoyed today’s report.
If you haven’t subscribed already, you can do so here.