Two days before Christmas 2020 — when many investors and traders were looking to just relax and prep for the holidays — fleet electrification company XL Fleet (NYSE:XL) took Wall Street by storm, with XL stock soaring as much as 80% in a single day on the back of a confluence of good news.
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No one saw this big rally in XL stock coming. Well, almost no one.
In InvestorPlace’s financial newsletter The Daily 10X Stock Report — which is aimed at delivering to your inbox, every single day, a stock pick that could rise by at least 10X — I alerted subscribers on Dec. 18 that XL stock was an explosive play on the electric vehicle revolution with enormous long-term upside potential.
At the time, the XL stock price was $15. The XL stock price today stands north of $30 — meaning XL stock has doubled for Daily 10X subs in less than a week.
In other words, no one saw this massive rally in XL stock coming except for The Daily 10X subscribers … and in seeing the big rally come before anyone else, those subs have made 100% their money in four trading days.
Believe it or not, being alerted to huge winners before they stage breakout rallies has become par for the course at The Daily 10X. Those subscribers were also told about Nio (NYSE:NIO), Plug Power (NASDAQ:PLUG), MindMed (OTCMKTS:MMEDF), FuboTV (NASDAQ:FUBO), QuantumScape (NASDAQ:QS), Luminar (NASDAQ:LAZR), JinkoSolar (NYSE:JKS), Blink Charging (NASDAQ:BLNK), Digital Turbine (NASDAQ:APPS), and many, many others before those stocks staged huge breakout rallies, and have scored 100%-plus gains in all those names, too (to read more about the newsletter, click here).
But back to XL stock, I think this big December breakout could actually be just the beginning of a much bigger, longer uptrend wherein shares soar above $100.
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Here’s how that could happen.
The Electric Vehicle Revolution’s ‘Gap’
The world’s passenger and commercial fleets are being electrified.
That much is certain. Thanks to falling costs, shifting laws, and improving technology, electric cars, busses, vans and trucks will increasingly become the global norm.
But ubiquity for electric vehicles is a long way off.
Most cars on the road today (about 97%) are powered by fossil fuels. By extension, nearly all of the automotive manufacturing capacity in the world is wired to create gas and diesel vehicles.
Producing enough EVs to displace the tens of millions of gas and diesel cars, busses, vans and trucks on the road today will require a “re-jigging” of the world’s automotive manufacturing network – something that will inevitably take years, even decades, to fully complete.
But we need to reduce carbon emissions now.
And so “The Gap” emerges in the EV Revolution.
Today, there exists a big gap in the automotive market between robust demand and need for cleaner energy vehicles, and limited supply to meet that demand.
Someone has to fill that gap.
That someone is going to be XL Fleet — which, of course, is great news for XL stock.
XL’s Plug-and-Play Solution to Decarbonize Fleets
The aforementioned EV Revolution Gap exists for one big reason – making electric cars is fundamentally different than making diesel and gas cars.
So, if an auto maker like Ford (NYSE:F) or General Motors (NYSE:GM) wants to make a new fleet of EVs, they can’t just tweak their existing manufacturing plants. They have to make some drastic changes, the sum of which will require a lot of time and money.
But what if no drastic changes were needed? What if Ford and General Motors could simply make one small tweak to their manufacturing plants, and… voila, produce eco-friendly vehicles?
Surely, that would fix the EV Revolution Gap, no?
It would – and that’s exactly the dream that XL Fleet is trying to make a reality.
Xl Fleet has created a proprietary line of eco-friendly powertrains designed for medium-duty commercial vehicles that are simply plug-and-play solutions for auto makers to immediately and cost-effectively decarbonize their fleets.
The idea is simple.
Let’s say Ford wants to make an eco-friendly version of its Transit Van. The company could create an entirely new manufacturing plant for the new van, which would take several quarters and millions of dollars.
Or, Ford could keep its old plant, and simply swap in an XL powertrain to improve the fuel efficiency and carbon emissions profile of the van. Very little extra cost. Very little assembly line adjustment. And almost no added time.
In other words, XL Fleet has created a series of powertrain solutions which can be used immediately — and without much extra cost — by fleet operators to reduce carbon emissions.
XL Fleet fills “The Gap” in the EV revolution, and that has huge long-term implications for XL stock.
Hybrid First, Electric Second
To be sure, XL Fleet’s powertrains are not fully electric. They are hybrid. That’s why they work as a plug-and-play solution in current auto manufacturing plants.
But hybrid is better than nothing – and given that EV production capacity is still decades away from being fully capable of supplying the entire auto market, XL Fleet’s hybrid powertrains are a huge step in the right direction, and a highly attractive, scalable solution for fleet operators today.
That’s why XL Fleet has amassed an unrivaled blue-chip customer base over the past few years, the likes of which includes FedEx (NYSE:FDX), Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP), and Verizon (NYSE:VZ). These major corporations see XL powertrains as an optimal way to cheapen and accelerate their path towards being reducing emissions.
Thereafter, XL Fleet will create a path for them to go fully electric.
That’s because XL Fleet is developing a fully electric version of its plug-and-play XL powertrain. That fully electric powertrain could very well turn into the foundational technology upon which a big chunk of tomorrow’s electric fleets are built.
If that does happen — and the odds are in XL Fleet’s favor — then XL stock will soar to $80 in the long run (at least).
XL Stock to $80?
According to Bloomberg NEF – one of the most qualified clean energy research firms in the world that always seems to spot-on about the EV revolution – less than 10% of medium-duty commercial vehicle sales in 2030 will be electric.
That means 90% won’t be electric, equating to over 1.5 million medium-duty trucks, the vast majority of whom will be looking for alternative decarbonization routes.
The fastest option? The most cost-effective option? The most proven option? The best option?
Even if XL Fleets nabs just 10% of this market, that implies over 150,000 powertrain deliveries in 2030, which my numbers say could flow into nearly $4 billion in revenues and $550 million in net profits.
A 20X multiple on that implies a potential future valuation of $11 billion. Based on the current fully diluted share count, that implies a long-term price target for XL stock of roughly $80.
Could the XL Stock Price Hit $100?
Importantly, my $80 long-term price target on XL stock doesn’t include any penetration into the heavy-duty market, for which XL Fleet is designing a new eco-friendly powertrain platform that is expected to launch soon.
Nor does it include XL Fleet’s fully electric powertrain concept, which is also expected to come-to-market soon.
Both of those new products represent significant addressable market expansions – and could end up being game changers in their own right. They could easily add another few billion dollars in revenue (at least) and few hundred million dollars in profits (again, at least).
If profits do run to $1 billion by 2030, then this is a potential $20-plus billion company in the making (using a 20X multiple). That equates to a future XL stock price of $140.
Bottom Line on XL Stock
By filling “The Gap” in the EV Revolution, XL Fleet could one day turn into an enormous company at the epicenter of fleet electrification — and XL stock could turn into your next big winner.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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