Investing in Hyliion (NYSE:HYLN) stock is really a matter of judging the company’s future direction. It wouldn’t be incorrect to state that the company could revolutionize the trucking industry. After all, if it can successfully commercialize its retrofit, hybrid diesel and natural gas powertrains for class 8 vehicles, it can rise massively.
A potentially massive market exists. The trucking industry certainly wants to reduce expenses as any other industry does. So, if Hyliion can prove to trucking fleet operators that its tech works, and do so before other competitors, it should be a winner.
I’ll argue the opposite: That investing in Hyliion now is still too risky a proposition, and there is little that indicates it will emerge a winner.
That said, Hyliion’s business proposition isn’t without appeal.
Hyliion’s Offering
Making internal combustion class 8 trucks into hybrid trucks with a retrofitted system like that of Hyliion is an intermediate market worth billions of dollars.
And although Hyliion isn’t selling those systems yet, it also isn’t in any immediate financial danger. So, for investors with a bit of a green bent, I can see why HYLN stock is attractive.
I just don’t think you should be among them because there is too much that indicates the risk isn’t worth it.
Financially OK
We won’t know how Hyliion fared in the second quarter until Aug.11 when it releases earnings. I assume there will be little difference between the second quarter and the first quarter.
That means the company will have burned through more cash but will maintain a large enough cash balance to remain comfortable.
In the first quarter Hyliion’s cash position decreased by nearly $55 million. It spent nearly $11 million in operations, and nearly $60 million of cash in investment activity. Fortunately it was able to offset a portion of those losses by exercising $16 million in stock warrants. The net effect was that Hyliion’s cash position decreased by $55 million, to nearly $335 million.
It would be fair to characterize Hyliion as a company that appears to have enough cash alone to sustain its existence for at least another year-and-a-half or two. It is also one which records no revenue.
When second quarter earnings are released investors should expect a similar situation to that which transpired in the first quarter. That said, there were a few positives to consider for Hyliion during the second quarter.
Partnering and Testing
For Hyliion, the rubber hits the road when the company can convince fleet operators that its retrofit hybrid powertrains provide utility.
Fortunately for Hyliion, there was positive news on that front in the second quarter. On May 20, Hyliion announced that it had partnered with Detmar Logistics LLC in a fleet electrification project. Detmar Logistics is a Texas-based oil and gas company looking to electrify its fleet of 100 trucks over the next five years.
The announcement noted that Detmar Logistics has placed an initial order of 10 units. That is a positive, but the press release tells little else. We’ll have to wait until the Q2 earnings release to understand the financial implications of the deal.
Roughly a week after Hyliion announced its partnership with Detmar Logistics it provided feedback on a CNG solution loan program. As the press release noted: “The Hybrid CNG truck was loaned to three Oregon-area fleet operators – Baker Rock Resources, Tillamook County Creamery Association, and Calportland – over a three-week trial period. Each participant reported that the Hyliion Hybrid solution delivered more power, greater sustainability, and improved operating costs.”
Proof
The details of these programs and those of previous programs are lacking, in my opinion. Hyliion provides vague details in regard to what it has actually achieved. Imagine if you were in the shoes of a fleet manager with the responsibility to quantify the costs, advantages, and disadvantages of Hyliion’s products. You’d require definitive case studies and evidence. It seems like HYLN stock has been stuck in this phase for quite some time.
It’s easy to imagine that big truck manufacturers are testing and sifting through data regarding similar products. They have every chance to leap frog Hyliion and develop their own technology.
Maybe they will, and maybe they won’t. But for now Hyliion seems to be treading water and there’s little to suggest investing at this point.
On the date of publication, Alex Sirois 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.