Piper Sandler analyst Alex Potter initiated protection on Polestar Automotive Holding UK Restricted PSNY with an Overweight rating and a price target of $3.
As a result of Polestar’s singular concentrate on premium electrical automobiles, all of Polestar’s future launches will value no less than $60k, with some merchandise simply exceeding $100k, notes the analyst.
Although this technique limits the dimensions of PSNY’s addressable market, the analyst says, excessive costs ought to assist above-average margins.
The corporate can look to promote 325,000+ models/12 months, with 11% working margin, writes the analyst.
The analyst notes that automobile manufacturing requires enormous capital and a few startups are utilizing outsourced manufacturing to deal with it.
However Polestar has discovered a novel resolution to this through the use of its key shareholders as manufacturing companions, says the analyst. This method, in response to the analyst, might cap margins, however will increase ROIC and expedite the launch course of.
The $3 value goal implies PSNY will commerce at 1.3x EV/income, based mostly on the analyst’s 2024 estimate.
The analyst lists Anti-China commerce coverage, dilutive capital infusions, low liquidity, excessive reliance on Geely/ Volvo, competitors from different luxurious manufacturers, rising rates of interest, and launch delays as potential danger elements.
Given a compelling valuation, in addition to a mixture of different favorable funding attributes, the analyst says traders ought to think about constructing a place.
If Polestar efficiently raises ~$2.5 billion within the coming quarters (some mixture of debt+fairness), the analyst writes the corporate won’t require extra money sooner or later.
PSNY has a good observe document of gross sales, in addition to affected person strategic shareholders, international attain, and a plausible path to breakeven, says the analyst.
Worth Motion: PSNY shares are buying and selling increased by 0.24% at $2.0150 on the final verify Wednesday.
Picture By way of Firm