Electric vehicle (EV) manufacturers continue to gain momentum as the world shifts towards cleaner energy solutions, making them appealing to long-term investment prospects. While the retail EV market has become crowded with contenders, the commercial sector remains relatively unexplored, with only a handful of players.
One such player in the commercial EV manufacturing sector is GreenPower Motor (NASDAQ:GP), a Canada-based micro-cap stock with a market value of $74.35 million. Despite a recent pullback in the industry, GP has surged by 60% year-to-date, surpassing most other EV stocks. According to Wall Street consensus estimates, GP still holds significant potential for further growth.
GreenPower Motor’s Mission and Operations
GreenPower specializes in the production of purpose-built, battery-powered medium and heavy-duty vehicles. The company’s management team boasts prior experience with automotive giants like BYD and Mercedes-Benz.
GreenPower offers a range of commercial vehicles tailored for various applications, including delivery, public transit, schools, cargo transportation, and micro-transit shuttles. These vehicles are available for lease to customers, ensuring a steady stream of revenue for the company.
As a “Buy America” compliant enterprise, GreenPower maintains a final assembly facility in California. Its flexible factory infrastructure supports an asset-light business model, and the company carries low balance sheet debt. At the close of the second quarter, GreenPower had a combined production capacity of 1,000 units per year.
Moreover, with a newly commissioned manufacturing facility in West Virginia, GreenPower has expanded its capacity, enabling more cost-effective deliveries in the eastern United States. The company’s collaboration with a diverse set of contract manufacturing partners acts as a safeguard against potential supply chain disruptions.
GreenPower’s Q2 Performance
GreenPower’s expanding manufacturing capabilities have been instrumental in driving its revenue growth, which increased from $13.5 million in fiscal 2020 (ending in March) to $39.6 million in fiscal 2023. In fiscal Q1 of 2023, the company reported revenue of $17.58 million and gross profits of $2.79 million, resulting in a margin of 15.9%. Comparatively, in the same period a year prior, sales amounted to $3.85 million with a gross margin of 27.3%. The company attributed the significant narrowing of gross margins to higher shipping costs and sales of the EV Star CC vehicle under a high-volume contract.
In fiscal Q2, GreenPower remained focused on increasing production and deliveries of its school bus product line. CEO Fraser Atkinson highlighted, “Manufacturing of the Type A Nano BEAST is underway at the South Charleston facility, and the West Virginia production team also made preparations for the start of Type D BEAST production which will begin this fall.” During this quarter, GreenPower set a new record by delivering 16 purpose-built school buses, collaborating with its dealer network in the U.S. to ensure compliance with various state school bus specifications. The company is also working with schools to plan and develop charging infrastructure, a crucial step in deploying these vehicles.
Target Price for GP
Analysts following GP anticipate a substantial increase in sales, with a projected rise of 98.3% to $78.7 million in fiscal 2024 and a further 39% increase to $109.5 million in fiscal 2025. Losses per share are expected to shrink from $0.64 in fiscal 2023 to $0.06 in 2025. GP is currently trading at 0.93 times its forward sales, representing an attractive valuation for a growth stock.
All three analysts covering GP recommend a “strong buy.” The average target price for GreenPower is $8.67, indicating an anticipated upside of 208% from its current levels.
In conclusion, GreenPower Motor is a commercial EV manufacturer with a compelling growth story, and its impressive year-to-date performance and optimistic analyst projections make it a noteworthy candidate in the electric vehicle industry.
Featured Image: Freepik @ studioworkstock
