Pure play hydrogen mobility company Hyzon Motors USA Inc. went public through a reverse merger with Decarbonization Plus Acquisition Corporation on July 16. The combined company, named Hyzon Motors Inc. (HYZN), began trading on the Nasdaq stock exchange on July 19.

The Honeoye Falls, N.Y.-based company raised $559 million in primary capital through this business combination. Regarding its SPAC listing, Hyzon CEO Craig Knight said, “Our public listing will foster greater awareness that the future of commercial transportation—hydrogen fuel cell-powered vehicles—is today’s reality. It’s the beginning of a new chapter in the history of Hyzon as we accelerate the transition to hydrogen commercial transport worldwide and advance our commitment to reducing carbon emissions in a sector that is one of the largest contributors to climate change.”

The stock opened at $9.70 on its first trading session, which was 34.3% above its $7.22 pre-listing price. However, it has since declined 19% in price and is currently trading below its 200-day moving average of $10.50.

Here’s what could shape HYZN’s performance in the near term:

Early-Stage Company

As an emerging growth company in the hydrogen fuel cell industry, HYZN has  yet to commercialize its operations to generate revenues. Its delivery of heavy commercial vehicles is anticipated  to begin in Europe and in the first quarter of 2022 in North America. The company is currently setting up domestic production facilities in Chicago and New York, which are forecasted to be operational in the fourth quarter of 2021 and the second quarter of 2022.

HYZN delivered its first fuel cell trucks to European customers in July, consistent  with its plans to sell 85 vehicles by the end of this year. Its first vehicle revenues are expected to be generated in the current  quarter (ending September).

Risks

HYZN currently has several non-binding Memoranda of Understanding (MoU) and letters of intent with multiple companies worldwide , with a combined worth of $83 million. These include Superior Pak (Australia/New Zealand), Coregas, a subsidiary of Wesfarmers (Australia), FrieslandCampina (The Netherlands), TotalEnergies (France), MPREIS (Austria), John G Russell (United Kingdom), ARK Energy, a subsidiary of Sun Metals (Australia), Chart Industries (North America), Fortescue Metals Group (Australia), Sojitz Machinery Corporation of America (North America), JuVe Automotion (Europe), and NEOM (the Middle East/North Africa). However, these potential customers do not translate to assured sales because  the counterparties have no obligation to make purchases.

Also, as a U.S.-based company, HYZN can only operate in Europe through its partly owned subsidiary Hyzon Motors Europe B.V., which was created  through a joint venture with Holthausen Clean Technology Investments B.V. HYZN has limited ability to conduct operations in Europe outside of Hyzon Europe, which might limit the company’s growth prospects in the region in the long run.

Poor Financials

HYZN is still in the production and development stage and, hence, has not generated revenues from its operations. While it expects to generate revenues in its  fiscal third quarter, the company has released no official forecast. Moreover, the company’s loss margins have widened in the most recent quarter, ended June 30. Its loss from operations came in at $9.27 million, up 5,619.6% year-over-year. Its comprehensive loss increased 5,778.5% from the same period last year to $9.77 million. And its non-GAAP EBITDA and loss per share were $9.10 million and $0.10, respectively, over this period.

POWR Ratings Reflect Bleak Prospects

HYZN has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

HYZN has a grade of D for Quality. This is justified, given the company’s negative profit margins.

Of the 62 stocks in the D-rated Auto & Vehicle Manufacturers industry, HYZN is ranked #48.

Beyond what we’ve stated above, we have rated HYZN for Value, Growth, Sentiment, Stability, and Momentum. View all HYZN ratings here.

Click here to check out our Automotive Industry Report for 2021

Bottom Line

HYZN is yet to generate revenues from its operations as a start-up hydrogen fuel cell-powered car manufacturer. With substantial overhead costs incurred to establish and maintain its production and assembly factories, it might take a long time for HYZN to generate profits. Furthermore,  with its commercial delivery of vehicles expected to begin in the current quarter, the quality of HYZN vehicles has  yet to be evaluated. Thus, we think the stock is best avoided now.

How Does Hyzon Motors (HYZN) Stack Up Against its Peers?

While HYZN has a D (Sell) rating in our proprietary rating system, one might want to take a look at its industry peers Suzuki Motor Corporation (SZKMY), Isuzu Motors Limited (ISUZY), and Daimler AG (DDAIF), which each have an A (Strong Buy) rating.

HYZN shares were trading at $8.29 per share on Friday afternoon, up $0.47 (+6.01%). Year-to-date, HYZN has declined -21.79%, versus a 19.24% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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