Should you Buy the Dip in Volta?

San Francisco-based Volta Inc. (VLTA) operates a network of smart media-enabled charging stations for electric vehicles (EVs). The company went public through a reverse merger with SPAC Tortoise Acquisition Corp. II on August 27, 2021. The business combination was approved at TortoiseCorp II’s extraordinary general shareholders’ meeting held on August 25, with about 96% of the votes cast in favor of the business combination.

Since its stock market debut, the company has been partnering with several companies. It recently partnered with Six Flags Entertainment Corporation, the world’s largest regional theme park company and the largest operator of waterparks in North America, to make EV charging accessible to its guests at their parks across the United States. Also, the company installed new charging stations in cities like Fairfax, Virginia, and Lawrenceville, Georgia, aligned with its market penetration strategy.

Moreover, the company announced the issuance of two utility patents to Volta Charging by the U.S. Patent and Trademark Office on September 29. "These new patents add to a portfolio that reflects the foundational elements of our product design and our rich user experience, further positioning us as a premium partner within the EV charging space," said Scott Mercer, Founder, and CEO of Volta. The stock has gained 4.4% over the past month.

However, on September 30, VLTA lost 29.7% after the SEC freed up the company’s shares to be sold. Shares of VLTA slumped to a post-SPAC low of $7.89 in the session on dilution concerns. The SEC allowed the sale of over 116,019,569 Class A shares, including 30,000,000 Class A shares issued in a private placement in public equity or Private Investment in Public Equity (PIPE) placement. Over the past five days, the stock has slumped 21.9% to close its last trading session at $9.40.

Here’s what could shape VLTA’s performance in the near term:

Bleak Pre-SPAC Financial Performance

For the six months ended June 30, VLTA’s total revenues increased 86% year-over-year to $11.68 million. However, its loss from operations came in at $82.34 million, up 271.7% from its year-ago loss, while its net loss increased 243.3% year-over-year to $85.86 million. The company’s loss per share increased 86.2% year-over-year to $6.07.

Management Expects Revenue to Grow but Bottom-Line to Remain Negative

Over 2020-2025, the company expects its revenue to grow at a CAGR of 100%. In addition, the company expects to generate $826 million in revenue by 2025, with the charging network driving 56% of sales. The company expects its revenue to reach $47 million in 2021. The behavioral & commerce segment is also expected to drive 37% of 2025 forecasted revenue, while the data segment is expected to contribute the remaining 7%.

However, VLTA expects its EBITDA to come in at a negative $30 million in the ongoing year and to remain negative in the following year as well.

POWR Ratings Reflects Bleak Growth

VLTA has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

VLTA has a D grade for Growth, in sync with an increase in a net loss in the first half of 2021.

The company has a Momentum grade of C, consistent with its downward momentum in the past few days.

Of the 92 stocks in the B-rated Industrial - Equipment industry, VLTA is ranked #74.

Beyond what I have stated above, you can also view VLTA ratings for Value, Quality, Sentiment, and Stability, here.

View the top-rated stocks in the Industrial - Equipment industry here.

Bottom Line

The EV industry is becoming increasingly competitive as more and more companies are venturing into this rapidly growing space. VLTA is one of the fastest-growing names in the industry with its solid expansionary policies. However, the recent SEC report stating the freeing up of the company’s shares to be sold has triggered profit-taking, leading to the stock to decline. Although management’s recent press release highlighting its long-term revenue estimates look promising, its EBITDA is expected to remain negative. Given weak near-term prospects, the stock is best avoided now.

How Does Volta Inc. (VLTA) Stack Up Against its Peers?

VLTA has an overall POWR Rating of D, which equates to a Sell. Therefore, you might want to consider taking a look at its industry peers, Finning International Inc. (FINGF), Compagnie de Saint-Gobain S.A. (CODYY), and Sumitomo Electric Industries, Ltd. (SMTOY), which has an A (Strong Buy) rating.

VLTA shares were trading at $9.10 per share on Monday afternoon, down $0.30 (-3.19%). Year-to-date, VLTA has declined -14.55%, versus a 15.52% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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