Wall Street Is Cautious on EV Trucking Start-up Hyliion. Here’s Why.

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Some of the electric-vehicle companies that merged with special purpose acquisition companies—becoming publicly traded entities in the process—are picking up Wall Street ratings.
So far, the Street is being cautious on the new EV players.
Hyliion (ticker: HYLN) makes electric powertrains for heavy-duty trucks. The company completed its merger with the SPAC Tortoise Acquisition on Oct. 1. It’s picked two ratings. Both are Hold.
Goldman Sachs analyst Mark Delaney launched coverage of Hyliion in mid-October with a Hold rating. He sees promise for EV tech in heavy-duty trucking markets but has concerns over valuation.
Clean-truck technology can take market share from diesel “as a result of both regulatory momentum and our view that alternative powertrains have the potential in the future to offer better total cost of ownership than diesel over time,” wrote Delaney in his research report. But, he added, “we consider valuation to be full for an early stage company.” His price target is $22.
Delaney is a traditional auto analyst and covers companies such as General Motors (GM). J.P. Morgan analyst Paul Coster covers alternative-energy stocks. He launched coverage of Hyliion Wednesday withe a Hold rating. His price target is a little higher than Delaney’s, at $27 a share.
Coster says Hyliion’s strategy is pragmatic and low risk. The company, for instance, has a hybrid solution that can be adapted to today’s trucks for about $30,000. “But the market niche could get crowded and the reliance on natural gas could backfire,” adds Coster.
Hyliion makes battery-powered trucks. But the company uses a natural-gas-fired generator to recharge batteries on the fly. “Natural gas, widely viewed as a lower-carbon bridge to a zero emissions future, may fall victim to pursuit of a zero-carbon future,” writes Coster. “Which could dampen sales prospects for the gas-powered [truck] and force the company to pivot to all-electric or Hydrogen-based solutions at some cost.”
In recent weeks, investors have been focused on the risks. Hyliion shares have been hammered out of the gate. The stock is down 55% since the start of October, worse than the 2% loss for the S&P 500 and a 4% loss for the Dow Jones Industrial Average over the same span.
Hyliion shares are down 6.4%, at $19.91, in recent trading. The S&P 500 is off 3%.
Wall Street is turning more skeptical on U.S. based EV startups lately. Nikola (NKLA) became a publicly traded entity in June. Its first rating from Wall Street was Buy from Cowen analyst Jeffery Osborne. After a few more analysts launched coverage, half of them rated shares Buy. That’s down to about 40% rating shares Buy today. The average Buy-rating ratio for stocks in the Dow is abut 58%.
Lordstown Motor (RIDE) is the outlier. BTIG analyst Greg Lewis rates shares Buy with a price target of $50, up from recent levels around $14 a share. That is an eye-popping potential gain. Still, he is the only analyst covering the stock.
Of the other EV companies merging with SPACs, Canoe, Fisker, XL Fleet, Romeo, and QuantumScape still have no Wall Street coverage.
Write to Al Root at allen.root@dowjones.com

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