To say I’ve been skeptical about Hyliion Holdings (NYSE:HYLN) is a bit of an understatement. In fact, few opinions I’ve rendered have drawn the ire of retail investors more than when I’ve suggested that investors should pass on buying HYLN stock.
Well, those investors should be pleased with my current opinion. That is, with HYLN stock trading below $10 a share, it now looks like a reasonable speculative investment. The relative strength index (RSI) for Hyliion is hovering around 33 at the time of this writing. At several points this year, the stock has visited this level. And every time it has bounced; sometimes quite significantly.
I don’t expect anything different this time around. Although the company isn’t going to be delivering revenue any time soon, it is well capitalized and so it does appear it will deliver a product to market.
In this case, the product is the Hypertruck ERX, a Class 8 commercial truck that features an electric powertrain that is recharged by an onboard, natural gas generator. The benefits include lower operating costs, lower emissions, and – according to the company – superior performance.
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And the company has an agreement from Detmar Logistics to purchase 300 of the Hypertruck ERXs. For its part, Detmar has already been a partner of Hyliion’s existing hybrid trucks and in a press release remarked, “Our drivers are eager to get behind the wheel of this new technology. They’ve had an outstanding experience with the hybrid trucks and their anticipation for the Hypertruck ERX is even greater.”
However, before investors go all-in on HYLN stock, they will want to make sure that the company’s production schedule for the Hypertruck continues to move forward without a hitch. Detmar is scheduled to get a preview of the demo units late this year with trials running in 2022. If all goes well, the companies will sign a final (and I would assume binding) agreement in April 2022.
Is the Third Time a Charm?
Hyliion is a pre-revenue company, so investors must take their victories as they get them. In this case, the company beat analysts’ estimates when it reported earnings on Aug. 9. This was the third consecutive quarter that Hyliion has managed to post an upside surprise.
And analyst opinion remains in the company’s favor. The consensus price estimate for HYLN stock is $18. Plus, the most bearish among the analysts gives the company a price target of $12.
However, as Nicolas Chahine recently wrote, investors have not seemed that impressed. HYLN stock dropped 19% since issuing the earnings report.
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Currently many options to diesel fuel are emerging. On one side, you have alternative fuel vehicles under development. On the other, there are fully electric vehicles. With that in mind, Hyliion’s hybrid approach would seem to present investors with an intriguing opportunity.
But, as my InvestorPlace colleague Josh Enomoto reminded investors, it’s not the only game in town. Enomoto recently wrote:
But eventually, it cannot be helped that alternative fuels are transitional fuels. Increasingly, tech industries are focused on electric-powered everything. If so, the federal government has a difficult choice — build out alternative-fuel infrastructure that could be obsolete within a few decades or fully invest in all-electric infrastructure.
This is one time when optionality is a double-edged sword for investors.
HYLN Stock Is All About the Opportunity Cost
The electric vehicle/alternative fuel sector is still taking shape. And while the real growth may not happen as quickly as investors would like, I believe this time really is different. My reason for that opinion is because the cost and the technology are finally starting to align.
With that said, a range of outcomes are still possible for HYLN stock. Investors that are holding on to their shares should strongly consider the opportunity cost that they could be paying by ignoring other investments.
However, if you’ve been thinking of starting a position, buying HYLN stock at a price below its SPAC price makes some sense. By exercising patience and by starting small and adding to your position over time, HYLN could be a rewarding stock in 2022.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.