Is ZM (Zoom) too rich at $219/share? I should have bought MSFT (Microsoft) at $135!! UAL (United Airlines) can’t be worth only $40 right now, can it? A lot of folks have been trying to figure out how to “play” the effects of COVID-19 into their stock portfolios. While we here at CAPM 2.0 are not stock pickers, we have been noticing some pretty fascinating trends in the stock market. Let’s take a look.
Solar stocks like Enphase (ENPH) and SolarEdge (SEDG) have had amazing runs of late, primarily because they supply leading edge components for the ongoing renewable energy revolution. Since solar panels produce direct current (DC) power, it needs to be “inverted” into AC power for use in our homes. Enphase makes “smart” microinverters that integrate into full home software solutions that include batteries and panel monitoring apps. SolarEdge makes centralized inverters and power optimizers that increase the efficiency of the systems throughout the day. Together these two companies control 80% of the home inverter market. Investors see their solutions adding punch to the commoditized solar panel market. Over the past 12 months, these two stocks are up about 150%, while the S&P 500 is up 4% and the fossil fuel energy ETF XLE is down 34%.
CAPM 2.0 readers loved our May 17 piece on Nikola, which is leading the hydrogen truck revolution. You may recall Nikola was acquired in a surprise reverse merger with a special purpose acquisition company (VTIQ) lead by former auto exec Stephen Girsky. Since our story, VTIQ (renamed NKLA) has almost quadrupled from $18 a share to $68 a share, a market value of nearly $23 billion (General Motors has a $39 Billion market cap). While the valuation may seem a wild – 7 times 2024 revenue – it is a sign that investors are bullish that this company will revolutionize long haul trucking with a carbon free alternative to the ubiquitous diesel-run tractor trailers.
The SpaceX Dragon spaceship that carried two astronauts into space on the May 30 launch of the Falcon 9 rocket isn’t the only part of Elon Musk’s empire that is soaring right now. The last year has seen Tesla (TSLA) run from $221/share to over $930 share, an astounding rise in value. The leading manufacturer of high-end electric AND soon to be self-driving vehicles, lithium ion batteries and solar panels is riding high as the current champion of the renewable energy future. Analysts see the global electric vehicle market rising from $115 billion now to over $560 billion in 2026, with Tesla leading the pack.
We are not recommending anyone buy into these stocks at these frothy valuations. We are pointing out the desire on Wall Street and Main Street to see companies making big bets that promote a sustainable energy future. There are hundreds of other public and private companies making similarly forward-thinking products, including smart home thermostats, solar panels that double as roofing tiles and road asphalt, high efficiency wind turbines, heat pumps, sustainable food companies, waste to energy technology, hydrogen electrolysis companies. Keep an eye out for those and send us suggestions: doug.mckeige@capm20.com, tim.callahan@capm20.com
