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The EV market has been hot since Tesla, Inc. (NASDAQ: TSLA) announced record Q2 deliveries last week. Following Tesla’s announcement, other EV manufacturers like Rivian Automotive, Inc. (NASDAQ: RIVN) and Polestar Automotive Holding UK PLC (NASDAQ: PSNY) joined the party by also reporting extremely positive delivery numbers. While RIVN stock jumped by as much as 54% on its deliveries, PSNY did not receive the same attention from investors as the stock only went up 5% on its announcement. Given the company’s performance this year, Polestar stock is one to keep a close eye on this week.
Polestar Stock News
In June 2022, the Polestar stock IPO took place valuing the company at $18.6 billion. Given the bearish sentiment surrounding EV SPACs and the overall market environment, PSNY stock has steadily lost value since its IPO. However, in 2023 Polestar’s situation could improve thanks to improving supply chains, the release of the Polestar 4 SUV coupe, and deliveries of its other EV models.
EV manufacturers have been particularly impacted by semiconductor shortages and PSNY is no exception. Polestar was forced to adjust the features of its Pilot Pack for all markets except the US and Canada. PSNY plans to retrofit vehicles missing the hands-free tailgate foot sensor starting the 49th week of 2022. Despite this setback, Polestar has remained largely on track due to its major shareholders Volvo and Geely.
Compared to other EV manufacturers, PSNY was able to ramp up production and maintain its schedule with fewer problems. This is a bullish sign considering that Polestar’s production was negatively impacted by Shanghai lockdowns in 2022 . In fact, Polestar’s biggest obstacle has been shutdowns in China that led the company to cut its expected deliveries for the year. China’s Covid policy will have a smaller impact on Polestar starting next year since production of the Polestar 3 and 4 will take place at Volvo’s facility in South Carolina.
Both Geely and Volvo have committed to increasing EV production on a large scale. Volvo plans to become an all-electric car manufacturer by 2030 while Geely plans to make 50% of all its car sales electric by 2023. Since both companies are major shareholders in PSNY, Polestar will have the opportunity to tap into their resources and supply chain networks as it continues to expand.
So far, PSNY has not been impacted by rising battery costs due to its contract terms with Volvo. However, Polestar has recognized the need to maintain and grow its access to battery cells which is why it plans to develop and manufacture its own in the future. In the meantime, one of its lithium-ion battery suppliers – LG Chem – has signed a MOU with Snow Lake Lithium (LITM) to establish a domestic supply chain of lithium in North America once production begins in 2025.
In the meantime, investors bullish on PSNY stock believe that it will eventually benefit from the favorable landscape for EV manufacturers created by current legislation. According to Polestar’s management, it’s unlikely that its customers will benefit from the Inflation Reduction Act due to their combined yearly income, however other legislation like the Build Back Better Act and laws passed in California banning the sale of gasoline-powered vehicles by 2035 could be long-term catalysts for the stock.
On this note, charging stations are becoming increasingly important as demand for EVs rises. Polestar could attract more customers tired of high gas prices thanks to its partnership with Electrify America which provides 2 years of free charging sessions to new and existing 2021 and 2022 Polestar 2 customers. This and other features make Polestar’s vehicles strong competitors in the EV market.
For example, PSNY launched its latest model – the Polestar 3 – in October 2022 . With an MSRP of $85,000, this model appears competitively priced compared to other high-end EVs and offers features such as an EPA range of 300 miles and the ability to go from 0-60 mph in 4.7 seconds.
Since Polestar is targeting the same audience as the Porsche Taycan, Tesla Model S Plaid, and Lucid Air, it’s important to compare its features with these other high end EV models. In comparison to the Porsche Taycan, the Polestar 3 has a lower MSRP and better mileage. Although the Taycan goes from 0-60 mph almost 1 second faster than the Polestar, it appears to be a competitive option. On the other hand, the Tesla Model S Plaid is roughly $49,190 more in terms of MSRP but offers an EPA range of 348 miles and goes from 0 to 60 mph in only 2 seconds. The Lucid Air is also significantly more expensive than the Polestar 3 with an MSRP of $139,000 and EPA range of 469 miles. With time, Polestar may expand its lineup, offering additional features which would increase the MSRP. But for now, the Polestar 3 is a less expensive but still high-end EV model.
Another advantage PSNY offers is its industry experience. Other EV manufacturers like LCID and RIVN have announced mass recalls as they start getting production off the ground. Unlike other EV startups, PSNY spent years producing cars with Volvo and has had only 2 recalls so far.
Looking to the future, investors will be watching how well Polestar’s vehicles compete against manufacturers like Tesla. It appears that PSNY is positioning itself for growth in the autonomous vehicle market as well as for future modifications to its vehicles thanks to the software-defined architecture of the NVIDIA DRIVE platform. This chip is installed in the Polestar 3 and will help the company make over-the-air updates to its vehicles.
However, PSNY could face stiff competition from traditional OEMs like Ford Motor and General Motors which are targeting the EV market with their considerable spending power. Merrill Lynch’s “Car Wars” study shared its prediction that Ford Motor and General Motors will squash Tesla’s market share by 2025.
Even with the backing of Geely and Volvo, Polestar is no competition for these massive companies. Instead, PSNY may find its niche as a high-end EV manufacturer. Although several companies are competing for market share in this space, those with weak fundamentals could fall to the wayside as inflationary pressures continue to affect demand and prices.
*Updated June 15th, 2023
Joining other EV manufacturers like Fisker (NASDAQ: FSR) and Lucid (NASDAQ: LCID) in their 2023 cuts, Polestar announced that it cut its 2023 delivery estimates by 12.5% to 25% from 80 thousand deliveries to between 60 thousand and 70 thousand deliveries. Despite this cut in delivery estimates, PSNY is set to grow its deliveries YoY from the record 51.4 thousand it made in 2022 – representing a 16% to 36% increase.
The cut came due to a delay in Polestar 3 production since Volvo needs additional time to complete the software development for the new all-electric platform which is the basis of Polestar’s Polestar 3 software. Additionally, the cut can also be attributed to the tough market conditions the EV market is going through currently, especially since Polestar is not going to enter the price war Tesla (NASDAQ: TSLA) has started in the U.S. and Europe.
That said, Polestar announced that the delay will not affect Polestar 4 production plans and it will start production in Q4 2023 as planned. With the Polestar 3 going into production in early 2024, Polestar is going into 2024 with 2 new models which can lead to an extremely strong 2024 for Polestar stock.
On another note, Polestar is trying to improve its financial situation by decreasing operating costs which it has already succeeded in reducing by 13% YoY from $250 million to $217 in Q1 2023. Furthermore, Polestar announced a group wide hiring freeze and a 10% reduction in headcount in 2023, with further reductions in 2024. At the moment, administrative expenses make up the bulk of Polestar’s operating expenses so cutting them can get Polestar closer to profitability.
Potential Share Buyback
It is also worth noting that Polestar has asked its shareholders for approval to buy back 70 million shares which would effectively reduce Polestar’s float to approximately 190 million shares. The buyback, if approved, can increase Polestar stock’s value since more investors would be interested in buying the stock – putting upward pressure on the stock price. With the shareholders’ meeting set for June 28, Polestar stock could witness a run ahead of the vote.
*Updated July 9th, 2023.
After announcing a production cut for 2023 in its Q1 earnings call, PSNY reported record Q2 deliveries of nearly 16 thousand global deliveries – a 36% YoY increase. In this way, Polestar brings its total deliveries for 2023 to nearly 28 thousand – putting it on track to meet its 2023 forecast of 60 – 70 thousand deliveries.
Polestar is looking to maintain its deliveries momentum in the second half of the year as it intends to open up more than 20 permanent Polestar Spaces over the coming months and start deliveries of the upgraded Polestar 2. Through these actions, PSNY could be poised for yet another successful quarter in Q3 as its deliveries could continue to increase.
Despite the company’s positive developments, Polestar stock remains down 18.6% YTD and its record Q2 deliveries are yet to be appreciated by the market. In comparison, RIVN stock soared 54% on its Q2 delivery numbers, despite the fact that PSNY delivered 25% more vehicles in the same period.
Moreover, Polestar has a better gross margin of 3% compared to RIVN whose gross margin is at -80% which means that RIVN is actively losing money on each vehicle it sells. At the same time, PSNY boasts a P/S ratio of 28.87 while RIVN’s sits at a much higher 36.9 – indicating that Polestar stock is undervalued compared to RIVN stock whose market cap is more than double that of PSNY.
In addition to its impressive deliveries, PSNY is actively working to expand its market share in China as it entered into a JV with Xingji Meizu Group to develop Xingji Meizu’s existing technology platform into an operating system for PSNY’s vehicles sold in China. The new platform may increase PSNY sales in China, as the Chinese market generally has specific needs regarding software, since many services that are available in the West aren’t available in China, resulting in a lacking software experience in the Chinese market.
PSNY is also attempting to increase its share in the US market as it recently agreed with Tesla to adopt the new North American Charging Standard (NACS) to provide Polestar’s vehicles with access to Tesla’s expansive supercharging network. According to this deal, new Polestar vehicles sold in North America will be equipped with the NACS charging port starting in 2025 and adapters allowing existing Polestar drivers to access the network are expected in mid-2024. By having access to one of the largest charging networks in the US, Polestar’s vehicles could become more attractive to customers – potentially boosting sales.
Polestar Stock Financials
In its Q1 2023 report, Polestar’s assets slightly increased by 1% QoQ from $3,942 million to $3,983 million, and its cash and cash equivalents decreased by 10% QoQ from $973 million to $884 million. Polestar’s total liabilities slightly increased by 1% QoQ from $4,076 million to $4,124 million.
Revenue also increased 20% YoY from $452 million to $546 million. Operating costs decreased almost 13% from $250 million to $217 million which contributed to the operating loss decrease of 23% YoY from $258 million to $199 million. In this way, PSNY reported a net loss of $8.9 million – a 96% YoY decline.
@SPACpicks is watching PSNY for a move this week.
@silberschmelzer is bullish on PSNY’s deal with Tesla.
PSNY stock’s trend is bullish, with the stock trading in an upward channel within a sideways channel between $3.45 and $3.86. Looking at the indicators, the stock is trading above the 200, 50, and 21 MAs, which are bullish indications. Meanwhile, the RSI is approaching overbought at 67 and the MACD is approaching a bearish crossover. It is also worth noting that the stock has broken its $3.86 resistance but is yet to consolidate and test that level as a support. If the stock bounces off the $3.86 support, it could mean that the stock has entered a new channel between $3.86 and $4.71.
As for the fundamentals, PSNY stock just witnessed a catalyst in the announcement of the Q2 record deliveries and has an upcoming catalyst in its Q2 earnings report on August 31. Considering the extremely positive news the company has been sharing recently, Polestar stock appears to be poised to run this week.
PSNY Stock Forecast
While PSNY cut its 2023 delivery target by an average of 18.75%, the new target is still 25% more than the company’s record 51,491 deliveries in 2022 and is currently on track to reach the new target after achieving record Q2 deliveries. With the company also announcing exciting developments in its deal with Tesla and its JV in China, Polestar stock seems to poised to run this week as more investors become aware of these events’ potential. For this reason, Polestar stock is one to pay attention to over this month – especially with the company planning to release its Q2 earnings on August 31.
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