Stocks’ Details

Clean Energy Fuels Corp. 

2QFY20 Key Financial Highlights: Clean Energy Fuels Corp. (NASDAQ: CLNE) is engaged in providing natural gas (CNG and LNG) for transportation in North America. During the June 2020 quarter, the company reported revenues of $59.9 million, down 17.2% from the prior corresponding period. Revenue for 2QFY20 included $4.4 million from U.S. federal excise tax credits and an unrealized loss of $1.5 million on commodity swap and customer fueling contracts. Non-GAAP loss per share during the quarter stood at $0.02, flat year over year. Adjusted EBITDA for the quarter came in at $9.2 million, as compared to $8.9 million reported in the year-ago period. Total operating expenditure for the second quarter came in at $67.1 million, down from $78.1 million reported in the year-ago quarter. CLNE delivered 89.5 million gallons during the quarter, down 10% year over year, owing to a slowdown in business activities as a result of COVID-19. The company exited the quarter with a total cash balance of $96 million, and debt amounting to $37 million.

Key Financial Highlights (Source: Company Reports)

FY20 Outlook: For FY20, the company expects GAAP net loss to be ~$11.0 million. Adjusted EBITDA for FY20 is likely to be around $45.0 million. The company has signed an agreement with Chevron that is expected to expand the use of clean carbon-negative RNG for trucks in the ports of Los Angeles and Long Beach.

Key Risks: The natural gas market is a relatively new and developing market, and has suffered due to slow, volatile, and unpredictable growth in many sectors. This, with foreign currency fluctuation, interest rate risks, along with uncertainties due to COVID-19 pandemic, may adversely affect the company’s business, results of operations and financial condition.

Stock Recommendation: The stock of CLNE closed at $2.85 with a market capitalization of ~$566.3 million. The stock made a 52-week low and high of $1.05 and $3.75, respectively, and is currently trading above the average of its 52-week trading range. The stock gave returns of ~42.5% and 15.85% in the last three months and one month, respectively. Debt to equity ratio of the company stood at 0.17x in Mar’20 as compared to the industry median of 0.90x. On the valuation front, the stock is trading at an EV/Sales multiple of 1.7x as compared to the industry median (Oil and Gas) of 2.4x on TTM (Trailing Twelve Months) basis.  Considering the aforesaid facts, we recommend a “Speculative Buy” rating on the stock at the closing price of $2.85, down 2.4% on 21 August 2020.

Li Auto Inc.

TBNZ Served as an Underwriter in Li Auto's IPO: Li Auto Inc. (NASDAQ: LI) is an innovator in an energy vehicle market, which is engaged in designing, developing, manufacturing, and selling premium smart electric SUVs. Recently, UP Fintech Holding Limited’s wholly-owned subsidiary, Tiger Brokers (NZ) Limited (TBNZ), served as an underwriter in Li Auto's IPO, and received total subscription orders of $1.887 billion, out of which greater than $1 billion came from institutional investors and $800 million came from retail investors.

LI Announced Public Offering: On July 30, 2020, the company announced the pricing of its initial public offering of 95,000,000 American depositary shares (ADSs), each correspond to Class A ordinary shares of the company at a price of US$11.50 per ADS. The ADSs commenced trading on the Nasdaq Global Select Market under the symbol "LI", on 3 August 2020.

Key Risks: Uncertainties around the world due to COVID-19 pandemic are likely to impact n its financial performance. Further, stiff competition, rising costs and stringent regulations outlined by governments remain a potential headwind.

Stock Recommendation: The stock of LI closed at $15.02 with a market capitalization of ~$12.56 billion. The stock made a 52-week low and high of $14.31 and $19.9, respectively, and is currently trading below the average of its 52-week trading range. The stock has gained ~31% from the offer price of US$11.50 per ADS. The recent public offering will aid LI’s cost of capital, consequently strengthening the balance sheet and supporting growth. On the valuation front, the stock is trading at an EV/Sales multiple of 16.4x as compared to the industry average of 4.2x on TTM (Trailing Twelve Months) basis. Considering the aforesaid facts, valuation on TTM basis, limited available information due to recent listing, etc., we suggest investors to wait for more financial information and developments and hence, have a watch stance on the stock at the closing price of $15.02, up 1.83% on 21 August 2020.

NVIDIA Corporation 

Sneak Peek at NVDA’s 2QFY21 Key Financial Highlights: NVIDIA Corporation (NASDAQ: NVDA) is involved in providing graphics chip processors & related software services for a wide range of visual computing platforms. The company is a behemoth in visual computing technologies and the manufacturer of GPUs. During the period, the company reported revenues of $3.87 billion, up 50% year over year. Non-GAAP earnings for 2QFY21 stood at $2.18 per share, up 76% year over year. The bottom-line also soared by 21% on a quarter over quarter basis. Non-GAAP gross margin expanded 590 basis points (bps) on pcp and came in at 66%, depicting the enhanced impact of Data Center products and favorable GPU product mix. Non-GAAP operating income stood at $1.52 billion, up 89% on pcp. As at 26 July 2020, the company’s cash balance stood at $10.98 billion, with long-term debt amounting to $6.96 billion.

Key Highlights (Source: Company Reports)

Outlook: For 3QFY21, NVDA expects revenue to be ~$4.4 billion (+/-2%). The company expects non-GAAP gross margin to be ~65.5% (+/-50 bps) in the coming quarter. Non-GAAP operating expenses are likely to be ~ $1.09 billion.

Key Risks: Seasonal weakness in notebooks and Switch gaming consoles may be a potential headwind. Further, macroeconomic risks, given the extremely volatile trade environment, continue to be a key concern.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

 P/CF Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months.

Stock Recommendation: The stock of NVDA closed at $507.34 with a market capitalization of $312 billion. The stock made a 52-week low and high of $159 and $499.84 and is currently trading close to its 52-week high range. The stock has delivered a positive return of ~196.29% in the last one year. NVDA’ data-center business remains on track to benefit from the rising demand for Hyperscale. Also, rise in demand for gaming, high-performance computing, AI, and self-driving cars are key growth areas. Considering the above factors, we have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms).  Considering the valuation, current trading levels and decent returns in the past, we suggest investors to wait for better entry levels and hence, have a watch stance on the stock at the closing price of $507.34, up by 4.47% on 21 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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