a speculative but not CrAzY speculative stock poised to benefit from the infrastructure bill - with bonus meme potential
stocks with meme potential are a serious consideration these days - and this one at least has a legitimate and not totally unreasonably valued business behind it.
So, lets preface this with - for my widows and orphans and value investor readers, close this tab right now.
To preface it further, this idea was quick and borne from a tweet from some account I wasn’t even familiar with…
but it got the hamster wheel turning.
The Sleepy Joe Kumbaya infrastructure bill that was announced/proposed/leaked today includes $7.5 billion in funding for electric busses and even more for related industries. As our newfound friend @pennycheck pointed out, there is apparently an electric bus (related) company out there supposedly potentially poised to benefit from it.
So I did a little digging and I really liked what I saw *AS A SPECULATIVE IDEA*.
So what is PTRA? It is Proterra, a recently de-SPAC’d company that, yes indeed, helps electrify busses (providing battery packs and powertrains and charging infrastructure for OEMs) and provide related infrastructure. Not eventually in the future like a Lordstown Motors, but actually, really, today. They are expecting about $400 million in revenue this year, in fact.
But of course, as a SPAC’d target company, they are not trading at a discount valuation. At $10/share for the SPAC IPO buyers, they were valued at a $1.6 billion EV. At today’s $18/share, the equity value is $4.3 billion - after backing out the $800m of cash, they’re at about a $3.5b EV, or about 9x sales vs. the 3.7x at the time of IPO.
So, if you didn’t close this window when I recommended you do earlier, you may have now. 9x revenue for a bus component manufacturer - have I lost it? Probably. But that’s not any new development. But hear me out -
Tesla trades at 20x revenue.
Other EV upstarts like Lordstown (RIDE) and Nikola (NKLA) trade at infinity billion times everything.
This is an actual functioning growing business that may be richly valued on conventional metrics but not bad for the EV space. They are growing quickly and have real relationships with OEMs and other end customers.
And their market is forecasted to grow much faster than EV personal vehicles. This is from an investor presentation of Proterra’s - so take it with an ocean of salt - but apparently some management consultancy that I’ve never heard of thinks that electric busses will be 50% of the market by 2025.
I’m not a bus expert but I do know a couple things about them. One, they are expensive (i.e. the shell costs a lot of money, not just the engine/drive train). Two, they do a lot of stop-and-go traffic. Three, they don’t do a ton of miles per day. Those are all very positive considerations as to the benefit of an electric vehicle - long haul trucks are much less naturally inclined to be battery powered than a city bus that does a total of 80 miles per day at an average of 10 miles per hour.
So if I’ve now piqued your interest rather than made you cancel your (free) subscription, I encourage you to read their full investor presentation. I’m now done with the broad strokes here on why it is a not horrible long-term investment and about to move onto what we all care about in Summer-2021:
~~Meme potential~~
As noted in the opening, “Biden’s Infrastructure Bill” is apparently getting ready to go, which may include $7.5 in funding for electric busses, plus a similar amount for charging infrastructure and a gazillion dollars for general transport which may also benefit Proterra.
That makes PTRA one of the best pure-plays for this headline them. Yet, the meme traders are sleeping on it, as on 6/24/21 when this news broke, the stock only rallied 3% or so.
But, as the kids say these days, the rocket is on the launchpad. Time to Own The Hedgies for the only reason that WSB gets out of bed in the morning:
PTRA is fairly heavily shorted.
As of the latest data available to normie me (which is now about a month old), PTRA shorts have shorted about 5 million shares. Average volume per Nasdaq’s data below says that’s almost 10 days to cover. Yahoo finance shows me an average volume of about 800k shares per day, so more like 6 days. Either way, that’s a decent amount of short interest that will take some time (and run-up in price) to unwind.
Borrow is expensive too:
This highly-shorted state is not unique to PTRA - pretty much every SPAC that’s still above IPO price ($10) has a target on its back, and at $18/share (with an all-time-high near $30), I can almost feel the spittle of hedgies licking their shorty lips.
And that’s exactly what the bros at Wall Street Bets look to target, for better or worse.
So is it going to meme? Probably not - which I say only because there is a large universe of already known meme stocks as well as plenty up-and-comers that people are constantly trying to sell to the unwashed masses.
Could it meme? Certainly. EVs generally are sexy and a big beneficial infrastructure bill providing free funbucks to their industry right now is a fantastic story. And there’s enough short interest to add fuel to that fire.
So the trade?
I bought a few shares today.
I also bought some July $25 calls for 8, 9, and 10 cents a pop. If it doesn’t meme, oh well. On the off chance that it does meme, they could be 50x or 100x.
It’s a highly speculative and not huge position.
But with a prior high around $30, and lots of reasons why PTRA could come back into favor amongst the crowd that propels stocks to do ridiculous things - it is a fun small risk to take.
(As always, this is the opposite of advice.)
Yours,
Elmo