The “Made in America” label will help it break into the US market, but other challenges remain. (Picture: courtesy)
What to do with the shares of Lion Electric, Teck Resources and Apple? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.
Lion Electric (LEV, US$6.30, $8.03): Analyst Lowers Expectations
Lion Electric’s difficulties in breaking into the American electric truck market could well be a thing of the past when its plant in Illinois allows it to affix the qualifier “Made in America”, estimates Rupert Merer of National Bank Financial. However, some shadows obscure the portrait.
On the sidelines of the unveiling of the results for the first quarter of the 2022 fiscal year of the Saint-Jérôme company on May 3, the analyst issued his new expectations for him.
From a macroeconomic point of view, the rising cost of diesel and new incentives to electrify heavy vehicles on both sides of the Canada-US border could both work in its favor, believes Ruper Merer.
For example, starting next May, for the next 90 days, Washington will grant up to 375,000 US dollars (US$) for each new electric bus, for a total of 500 million US dollars (M$US) .
On this side, Lion Electric is already doing very well, with its 2,025 devices in its order book, recalls the analyst, who cannot however say the same for its truck division. It does not seem to enjoy the same enthusiasm as its competitors, which are sometimes only at the pre-production stage, because it cannot yet boast of manufacturing its devices on American soil. However, the tide could soon turn.
Also, supply and recruitment concerns continued in 2022, underlines Rupert Merer. That’s why he’s increasing his forecast for the costs of acquiring parts and his labor in his selling, general, and administrative expenses as the business grows.
The analyst still expects Lion Electric to sell 80 devices and generate US$2 million in revenue, but he is slashing the gross profit he had anticipated, taking it from US$3 million to US$2 million , while the consensus is instead betting on US$1 million.
The scenario is similar on the side of its expected earnings before interest, taxes and amortization, which slips from US$9 million to US$7 million. However, its earnings per share remain at US$0.06.
In addition, Rupert Merer recalls that the lifting of the freeze on May 7 of 8 million shares held by the entities that initiated the special purpose acquisition company into which Lion Electric has merged creates some concerns, since those they could part with it from May 9, 2022.
Taking all of these factors into account, the National Bank Financial analyst lowers its discount rate from 9.25% to 10%, with its target price sliding from US$13 per share to US$10.
Teck Resources (TECK.BT, $45.08): Biggest shareholder discount