Charged: GM downgraded on tepid EV demand, lack of hybrids

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

TEPID EV DEMAND, LACK OF HYBRIDS: Nomura downgraded General Motors to Reduce from Neutral with a price target of $34, down from $45, as the firm revised its earnings outlook for GM. Nomura raised market share assumptions for GM in the U.S. in FY24 and lowered spending assumptions for Cruise, but sees significant risks for GM’s emissions-compliance strategy in the U.S. as demand for EVs lags the company’s expectations and the absence of hybrids in its portfolio and the lack of investment in this technology compromises GM’s flexibility to respond to evolving car buyer preferences as emissions regulations get stricter. The firm also expects profitability at GM International to be dragged down by GM’s China exposure, as it views it as unlikely that any international OEM in China, not just GM, will be able to reverse the trend of market share losses to domestic Chinese OEMs.

TESLA RECALL: Tesla is recalling over 1.8M vehicles in the U.S. due to risk of software failure to detect an unlatched hood, the NHTSA said. An unlatched hood could fully open and obstruct the driver’s view, raising the risk of a crash, and Tesla has started rolling out an over-the-air software update to fix the issue, the auto safety regulator said. The recall affects certain 2021-2024 Model 3, Model S, Model X, and 2020-2024 Model Y vehicles.

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WELL-POSITIONED: Benchmark initiated coverage of Blink Charging (BLNK) with a Buy rating and $5 price target. Blink Charging, which manufactures, sells, and owns/operates primarily level 2 networked electric vehicle charging equipment, is “well-positioned” with a focus on Level 2 chargers, which is expected to be 90% of the market, the firm tells investors. Benchmark also likes Blink’s “menu of flexible business models” and its network focus, which it believes will provide a growing base of recurring revenues over time.

LACK OF VISIBILITY: CIBC downgraded Lion Electric (LEV) to Underperformer from Neutral with a price target of 65c, down from $1.15. While arguing that Lion’s underlying strategy is “sound,” the firm sees a lack of visibility around the timing of an improvement in delivery rates, further impaired by the company’s liquidity position. CIBC thinks that a pick-up in deliveries likely does not occur until 2025 and contends that “a step-function increase in deliveries is what will be required to get LEV’s shares moving higher.”

Roth MKM also downgraded Lion Electric to Neutral from Buy with a price target of 90c, down from $2. The firm notes Lion posted a 50%-plus Q2 revenue miss on a lull in EPA subsidy activity, plus headwinds for Canadian ZETF funding. Management initiated additional restructuring to lower expenses by $25M/year, including a 30% headcount reduction and planned sublease of excess real estate. Roth believes internal visibility remains low and is incrementally cautious about rising political risk for continued support of the EPA Clean School Bus subsidies.

SELL NEXTERA ENERGY PARTNERS: Morgan Stanley downgraded NextEra Energy Partners (NEP) to Underweight from Equal Weight with a price target of $20, down from $31. The firm expects questions around funding, both from buyout obligations on the company’s convertible equity portfolio financings and new growth investment, as well as related distribution cut risk to remain overhangs on the stock, with the possibility that “clarity could still be several quarters off.” Morgan Stanley now models a 90% distribution cut in Q1 of 2027 for NextEra Energy Partners.