Proterra
A company I’m currently invested in is Proterra (their investor SPAC deck can be found here) and I’m making the bet their stock will rise 5-10x in the next 5 years.. Revenue came in at 197M in 2020 ahead of the 193M guided in their SPAC deck and they recently reaffirmed 2021 guidance of 246M in their Q2 earnings report. Which would be 25% YoY growth.
They manufacture electric vehicles with 3 main areas of their business:
80% of current revenue:
Proterra Transit: their electric transit buses
20% of current revenue:
Proterra Powered: an EV platform for medium and heavy duty commercial vehicles
Proterra Energy: their charging and fleet management solution
The main investment thesis in this business is 2 part:
The electrification of US Transit Buses
Proterra’s long term bet on the commercial vehicle segment
Electrification of US Transit Buses
Proterra’s goal for the US transit market is 784M in revenue by 2025 up from 189M in 2021E with an accelerated CAGR of 48%. This compound annual growth rate is based on the fact that bus fleets are beginning to go electric and with cities like New York converting their entire fleet by 2035 the market is accelerating. Proterra is the current market leader with 48% of the US electric transit bus market from 2012-2019. BYD is second with 34%.
With 65,000 total buses in the USA and estimated 5k-6k purchases annually the market is somewhat limited. I believe the long term opportunity for Proterra is taking their expertise in transit buses and expanding it to the larger market of commercial vehicles.
Commercial Vehicle Segment
This is a huge market. Protera is specifically targeting 225B in global TAM covering long-haul, medium-duty, construction / mining and buses. Proterra’s strategy here is to partner with existing auto oems and provide a platform for electrification of heavy duty vehicles.
Current vehicles covered under these partnerships can be found here. Proterras’s goal is to user their expertise in transit buses and electrification to expand into these much larger markets. IE there are 480k school buses in USA
Proterra projects Proterra energy and Proterra powered to go from ~20% of revenue to 70% of revenue (and 1.782B) by 2025.
Valuation
At the time of writing, Proterra is trading at ~2B market cap or ~8x 2021E revenue. This would be quite a rich valuation if this was just a transit bus manufacturer (i.e. something like rev group trades at 0.5x 2020 revenue). However, we have to factor in older manufacturers are working in a dieing mature market (i.e. combustion vehicles) at low gross margins. EVs being a newer technology will enable higher gross margins. Tesla as an example has gotten up to a 24% gross margin in their latest quarter and Proterra is targeting 25%.
If Proterra can execute a plan of ~2.5B in revenue by 2025 and high valuations continue in the EV space I could easily see this stock 5-10xing from here.
With the recent poor performance of SPACs, this stock is sitting below it’s SPAC price 6 months ago despite meeting or exceeding their targets.
I know commercial vehicles are going electric, and I get excited about a company who’s been working on this technology since 2011 with a lot of former Tesla employees on their payroll.
Disclaimer: This does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this article should consult with his or her advisor.