Daily Rundown: March 2

CHRIS VERSACE: Good morning, Action Alerts Plus members, and Happy Thursday. I'm back to break down a few of the EV stocks in and outside of the portfolio that are shaping how I'm viewing the club's overall position in the space. Before we get to that, however, I hope you saw the alert I sent out this morning in which we further trim back our position in McCormick shares and downgraded them to a four rating, fulfilling our stated intention to do so.

Similar to the other recent McCormick trimmings that we've made with the portfolio, we used the funds to buildout the portfolio's position in Vulcan Materials this morning. The why behind that stems from favorable data in the January construction spending report and back-to-back months of favorable rail car loading data as it pertains to aggregates, asphalt, concrete, and that sort of thing, right in Vulcan's wheelhouse.

Now, all of that is covered in the alert. Again, it was sent out earlier this morning. Now, let's talk EVs. Yesterday, Tesla held its highly anticipated investor day that included CEO Elon Musk's would-be Master 3 Plan. Now, as we can see by the market's reaction, clearly folks were underwhelmed by what they learned. Some are even calling the event a, quote, "by the rumor, sell the news type of thing."

And look, we know based on our position in Apple that a lot of expectations can build up going into these events, and they can be a letdown. But let's talk about what we actually learned from the event. First, the company is looking to cut prices on its Model 3 and Model Y vehicles and also reduce production costs by as much as 50%. Yes, 50%.

Now, I see that really as a two-fold move. First, to become increasingly more cost-competitive as the overall EV landscape accelerates. Remember, the backdrop here is we have a lot more OEMs transitioning into EVs, bringing more models to market. So it stands to reason that the landscape is going to get much more competitive.

The other reason to do this is cutting prices will help foster overall EV adoption, pretty simple math. And that kind of speaks to Tesla's stated goal to hit 20 million EVs by 2030. Context on that just so we're on the same page, they did about 1.3 million in EVs last year. Again, the key here is more affordable EV sticker prices will help accelerate adoption.

Now, we tend to get a lot of questions on Tesla, and let me just say this. My biggest concern about Tesla is that increasingly competitive landscape that I just alluded to. And the concern is that it's going to erode Tesla's position in the overall EV market and/or weigh on its profitability. Now, as that happens, my concern is that folks are going to start to question that valuation, which currently stands at 37 times earnings on 2024 basis and 4.7 times EV-to-sales when it comes to 2024 revenue.

Now, those are pretty lofty numbers. Let's wheel over and take a look at those numbers for Ford, which are far, far lower by comparison. On a 2024 basis, Ford is trading at around 7 and 1/2 times earnings and just 0.3 times on an EV-to-sales basis. So the key here is really unlocking the value in Ford's shares as it continues to transform into not only an EV player but in overall a much more profitable company over the medium to longer term.

Now, let's get back on track. Tesla did touch on the long term view for EVs. But earlier this week, we had some news on the near term when Blink Charging reported its quarterly results and issued upside guidance for 2023 with revenue in the range of about $100 to $110 million, well above the consensus that was hovering around $95 million.

Now, again, context is always key here. Blink achieved revenue of just over $60 million in 2022, and that was up from roughly $21 million back in 2021. That revenue pattern tells me that the need for charging stations continues to be a growth opportunity. It also tells me we're starting to see the benefit of the Biden infrastructure law spending.

Again, that has dedicated funding to the buildout for the national network of EV charging stations. We should see that funding expand in the coming quarters, arguably making it a rising tide. It lifts all boats type of catalysts that we see from time to time, but that is also a positive one for our shares of ChargePoint.

Now, when it comes to ChargePoint, I know the shares are volatile, I know it is frustrating. I say that because I am frustrated as well. However, the key here is to focus on the medium to longer term opportunity as we see that industry transition for EV passenger cars, but also the larger transition out there for trucks and other vehicles, something I touched on with you in a note earlier this week regarding a move by the US Postal Service.

Now, given that volatility, what have we done? We've tried to make lemonade out of those volatility lemons and added to ChargePoint when the shares are at the lower end of the trading range. We did that, as you'll recall, back in November and December. Now, before we wrap, let's put all this together for you.

We are in the early innings of the EV transition that will bring more EVs of all kinds to roads and highways across the US. That is going to fuel the need for charging stations. And yes, I recognize the pun. We also have spending out of Washington that's going to help pay for that buildout.

So when ChargePoint reports tonight, in addition to the usual quarterly metrics, revenue, earnings, and all that, what else will I be watching? A couple of things. First, what is the timing of these newer deployments associated with recent wins, including last week's announcement with first year for 6,700 DC fast charging points.

I also want to know how it sees the impact of infrastructure shaping its quarterly guidance over the next several quarters. Sorry for the play on words there. But what we want to know is, what is the cadence? Is it expected to ramp as expected or is there some type of push out? Really, what I want you to see here is that the second half of 2023 will be stronger than the first half, the first half of 2024 will be stronger than the second half of 2023, and so on.

And as this unfolds, with this rising spending on EV charging stations and the continued buildout, accelerating revenue, accelerating profits and cash flow, my suspicion is that ChargePoint shares will become far less volatile. Remember, folks, we are playing the long game here when it comes to ChargePoint shares.

And that's today's rundown. Be sure to tune in tomorrow when JD Durkin is back to talk with Bob Lang taking a technical look on the market, the portfolio, and other things.