Shares of XL Fleet (NYSE:XL) gained 9% today after BTIG initiated coverage of the stock with a buy rating alongside a price target of $30. The company closed its merger with special-purpose acquisition company (SPAC) Pivotal last month.
Analyst Gregory Lewis believes that XL Fleet, which electrifies fleets of commercial vehicles, is positioned as a leader in the market and will benefit from rising demand from fleet owners looking to upgrade their vehicles. While many automakers are starting to increase production of electric vehicles (EVs), those efforts will take a long time and there are many commercial fleet owners interested in electrifying their existing fleets.
"Unlike most of the new EV up-starts, XL does not sell their own vehicles, instead, they take ICE (internal combustion engine) vehicles (primarily Class 2 through Class 6 vehicles) for existing commercial fleet owners and electrify (think add-on batteries and control systems) the drive train making the vehicles hybrids at one of their many (~100) upfitter partners across North America," Lewis wrote in a research note to investors. "And while we expect both existing auto-manufacturers and new EV companies to continue to increase their production of EVs over the next few years, we expect the transition by legacy OEMs and the production ramp-up of new EV companies to take years (probably decades), which provides XL the opportunity to scale up their business on the back of increasing demand for electrification solutions."
Lewis is modeling for XL Fleet to generate $1.4 billion in revenue in 2024, which should translate into $300 million in EBITDA. That would represent significant growth from the $21 million in revenue that XL Fleet expects to report for 2020.