Hyliion Holdings Corp.

HYLN Details

Natural Gas Fueling Partnership with American Natural Gas: Hyliion Holdings Corp. (NYSE: HYLN) is a Texas-based company that is engaged in the business to reduce the carbon intensity and greenhouse gas emissions of commercial transportation. As on 4 November 2020, the market capitalization of the company stood at ~$3.24 billion. The company has recently announced a partnership agreement with American Natural Gas, Inc., wherein ANG will build new fueling stations near Hyliion’s customer locations with no upfront capital costs to such customers. It will offer Hyliion customers discounted pricing for renewable natural gas at ANG fueling stations across the country.

Hyliion Inc. and Tortoise Acquisition Corp. Announce Merger: The company has announced that it intends to merge with Tortoise Acquisition Corp. (NYSE: SHLL) to advance and accelerate the commercialization of Hyliion’s electrified powertrain solutions. Upon the completion of the transaction, the combined entity will be named Hyliion Holdings Corp. and will trade on the NYSE under the symbol of HYLN. The merger is expected to drive corporate expansion and will increase the development and commercialization of the company’s powertrain solutions. The implied market capitalization of the combined company is more than $1.5 billion. The transaction is expected to be closed at the end of the third quarter of 2020. The proceeds for the transaction will be used to capitalize the balance sheet for full development and commercialization of Hyliion Hybrid and Hypertruck ERX products and pay transaction expenses.

Sources and Uses of Funds (Source: Company Reports)

Stock Recommendation: The company will report its third-quarter 2020 results on 12 November 2020. As per NYSE, the stock of HYLN is inclined towards its 52-weeks’ low level of $9.50, proffering a decent opportunity for the investors to enter the market. The stock of HYLN gave a return of 7.55% in the past three months but a negative return of 46.19% in the last one month. On a technical front, the stock of HYLN has a support level of ~$17.79 and a resistance level of ~$25.44. Considering the current trading levels, returns in the past three months, merger with Tortoise Group and partnership with American Natural Gas, we recommend a ‘Buy’ rating on the stock at the closing price of $21.08, up by 2.53% on 4 November 2020.

HYLN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

NextEra Energy, Inc.

NEE Details

NextEra Energy Partners in Portfolios of Renewable Energy Assets: NextEra Energy, Inc. (NYSE: NEE) is an American energy company. As on 4 November 2020, the market capitalization of the company stood at ~$143.63 billion. The company has recently signed an agreement with Global investment firm, KKR, wherein KKR will acquire equity interests in portfolios of contracted utility-scale wind and solar assets. KKR will invest ~$1.4 billion and has also signed a Letter of Intent with NextEra Energy Partners (NEP) to invest ~$900 million in future renewable energy transactions to provide access to capital for future growth.

Quarterly Performance (For the Period Ended September 30, 2020): During the third quarter ended September 30, 2020, the company’s reported revenue stood at $3.77 billion. Further, the company reported a net income of $1.229 billion on a GAAP basis as compared to $879 million for the third quarter of 2019. The company seems well-positioned to meet its 2020 and long-term growth prospects.

Quarterly Highlights (Source: Company Reports)

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: For 2021, NextEra Energy expects adjusted earnings per share to be in the range of $9.60 to $10.15 and is anticipating a growth of 6% to 8% in its adjusted earnings per share in FY22 and FY23. As per NYSE, the stock of NEE is trading very close to its 52-weeks’ high level of $77.02 and seems to have reached its market potential. The stock of NEE gave a return of 31.71% in the past six months and a return of 3.34% in the last three months. On a technical front, the stock of NEE has a support level of ~$71.57 and a resistance level of ~$76.84. We have valued the stock using the price to cash flow multiple based illustrative relative valuation and have arrived at a downside of lower single digit (in % terms). For the said purpose, we have considered Southern Co (NYSE: SO), Public Service Enterprise Group Inc (NYSE: PEG) and Eversource Energy (NYSE: ES) as peers. Considering the current trading levels, valuation, the softer market conditions and key investment risks, we suggest investors to wait for a better entry level and give an ‘Expensive’ rating on the stock at the closing price of $73.32, down by 3.55% on 4 November 2020.

NEE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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