Electric vehicle (EV) manufacturers have the potential to be solid long-term investment options, given the worldwide transition toward clean energy solutions. While the retail EV market has attracted multiple contenders, the commercial segment remains largely untouched, with only a handful of players.
One Canada-based commercial EV manufacturer is GreenPower Motor (GP), a micro-cap stock valued at just $74.35 million. Despite a recent industry-wide pullback, GP is up 60% year-to-date, outperforming most other EV stocks - and the shares still have significant upside potential, according to Wall Street consensus estimates.
What Does GreenPower Motor Company Do?
GreenPower manufactures purpose-built, battery-powered medium and heavy-duty vehicles. The management team at GreenPower is experienced, and has previously worked with auto giants like BYD and Mercedes-Benz.
The company offers commercial vehicles for delivery, public transit, schools, cargo transportation, and micro-transit shuttles. These vehicles are leased to customers, providing GreenPower with a predictable stream of revenue.
The Vancouver-based EV company is “Buy America” compliant, with a final assembly facility in California. A flexible factory infrastructure suggests GreenPower enjoys an asset-light business model and low balance sheet debt. It ended Q2 with a blended production capacity of 1,000 units per year.
Its newly commissioned manufacturing facility in West Virginia provides GreenPower with additional capacity, resulting in better economical access to deliveries in the eastern U.S. Moreover, a diverse set of contract manufacturing partners protects GreenPower against exposure to supply chain disruptions.
How Did GreenPower Perform in the June Quarter?
GreenPower’s widening manufacturing capabilities have allowed it to increase sales from $13.5 million in fiscal 2020 (ended in March) to $39.6 million in fiscal 2023. In fiscal Q1 of 2023, GreenPower reported revenue of $17.58 million and gross profits of $2.79 million, indicating a margin of 15.9%. In the year-ago period, it reported sales of $3.85 million and a gross margin of 27.3%. The company explained that gross margins narrowed significantly due to higher shipping costs and EV Star CC vehicle sales under a high-volume contract.
In fiscal Q2, GreenPower continued to focus on increasing production and deliveries of its school bus product line. CEO Fraser Atkinson stated, “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.”
GreenPower delivered 16 purpose-built school buses in Q2, a quarterly record for the company, and worked with its dealer network in the U.S. to ensure compliance with different state school bus specifications. GreenPower is also partnering with schools to help plan and develop a charging infrastructure to ensure the deployment of vehicles.
What is the Target Price for GP?
Analysts tracking GP expect its sales to rise by 98.3% to $78.7 million in fiscal 2024 and by 39% to $109.5 million in fiscal 2025. Its losses per share are forecast to narrow from $0.64 in fiscal 2023 to $0.06 in 2025. GP is priced at 0.93x forward sales, which is very cheap for a growth stock.
All three analysts covering GP recommend a “strong buy.” The average target price for GreenPower is $8.67, which indicates expected upside of 208% from current levels.
