Why XL Fleet's Stock Forecast Depends on Long-Term Execution

A wave of EV (electric vehicle) companies announced mergers with SPACs in 2020. XL Fleet went public through a reverse merger with Pivotal Investment and received $350 million in cash as part of the transaction. However, XL Fleet hasn’t had a good outing as a publicly traded company and has been going down. What’s the forecast for XL stock and will it go back up?

XL Fleet trades below the SPAC IPO price of $10. Several other companies including Canoo and Lordstown Motors trade well below $10. Nikola and Hyliion also trade below $10. The euphoria over EV SPACs has died down. Even Lucid Motors, which went public through a reverse merger with Churchill Capital IV (CCIV), also trades well below its highs.

So far, XL Fleet stock is down 64 percent in 2021 and looks set to continue its dismal run. The stock was down 7 percent in premarket trading on Aug. 13. While the YTD sell-off has been largely due to the broader market sell-off in EV names, company-specific factors have also been at play. XL is among the worst-performing EV names in 2021.

The company was accused by short-seller firm Muddy Waters of inflating its customer base and order backlog. Lordstown also faced allegations of inflating the order book and the company agreed that some of the orders were inflated.

XL Fleet discarded the findings from Muddy Waters. Some of the other SPAC names like Clover Health have also been accused of wrongdoings by short-sellers.

XL Fleet released its second-quarter earnings on Aug. 12 after the markets closed. The company posted revenues of $3.7 million compared to $1.9 million in the same quarter in 2020. The company posted a gross profit of $1 million in the quarter, which was higher than what it did in the second quarter of 2020.

However, XL Fleet's adjusted EBITDA loss widened to $11.4 million from $3.5 million during the period. Its adjusted net loss also more than doubled during the period to $11.8 million. XL Fleet’s earnings missed the estimates on both the top line and bottom line and the stock is falling in reaction to the earnings miss.

The global automotive industry is facing a severe chip shortage and XL Fleet has been impacted negatively. Referring to the supply chain issues in the automotive industry, especially from the chip shortage, XL Fleet CEO Dimitri Kazarinoff said that it has “significantly interrupting the ability of fleet customers to secure new vehicles on which our electrified drive systems are installed.”

XL Fleet expects the shortage of new commercial fleets to stretch into 2022. Most automotive companies have faced production issues from the chip shortage situation. The demand-supply mismatch has created a shortage of semiconductors.

Only two analysts are covering XL Fleet stock. One analyst rated it as a buy, while the other rated it as a hold. The stock’s median target price of $7.5 implies an upside of 5.6 percent over the closing prices on Aug. 12.

Investors have been getting increasingly wary of startup EV companies, especially the companies that have been involved in controversies. Despite falling sharply from its peaks, Lordstown stock hasn’t seen much buying interest from investors. Like all other startup EV companies, XL Fleet also has to deliver on the execution part.

The honeymoon period of 2020 where markets sent every EV name higher is pretty much over and markets want these companies to deliver. Any signs of faltering on the execution have led to a sell-off. XL Fleet will also have to deliver and improve its financials significantly for the stock to go up from these levels.