REE Automotive Stock: Wall Street Sees 500% Upside for This EV Stock

REE Automotive Ltd to Start Commercial Production in 2023

If the early bird gets the worm, then perhaps early-bird investors will end up gorging on massive gains from REE Automotive Ltd (NASDAQ:REE).

Most investors haven’t heard of REE stock because it only went public in July 2021 through a merger with 10X Capital Venture Acquisition Corp, a special purpose acquisition company. The move brought REE Automotive Ltd roughly $288.0 million in new capital and truckloads of optimism, but REE Automotive stock hasn’t lived up to the hype (yet.)

To be fair, 2021 wasn’t the best time for growth stocks to wow investors. Value stocks were doing great, but growth stocks faced headwinds from pending interest rate hikes, inflation, the supply chain crunch, and labor shortages.

Furthermore, impatient growth investors probably weren’t willing to invest in a company that isn’t expected to start generating revenue until 2023 (although that isn’t far away). The bandwagon for REE stock is much less crowded now that it’s down by roughly 70% from its initial public offering (IPO) price.

That sounds bad, and on the surface it is, but the outlook for REE Automotive stock is exceptionally bullish.

REE Automotive Ltd designs and manufactures modular, flat-platform chassis for electric vehicles (EVs). The company has successfully completed customer validation tests on non-public roads, unveiled an autonomous last-mile delivery concept vehicle, secured collaborations with automotive manufacturers, and extended its supply chain capacity.

In 2021, the company announced a strategic collaboration with J.B. Poindexter & Co., Inc., a leader in the walk-in van market in the U.S. Moreover, REE Automotive Ltd selected Austin, TX as the location for its U.S. headquarters and first U.S. assembly and testing facility (which it calls an “integration center”). (Source: “REE Automotive Announces Third Quarter 2021 Financial Results,” REE Automotive Ltd, November 16, 2021.)

The company was awarded $17.0 million in funding from the U.K. government, which is helping advance the commercialization of EVs. REE Automotive Ltd also won a European design award for its “Flatformer” concept, together with Hino Motors Ltd (TYO:7205, OTCMKTS: HINOF), which is the truck arm of Toyota Motor Corp (NYSE:TM).

With vital sections of its supply chain system in place, REE Automotive Ltd expects to begin mass production and revenue generation in 2023.

That’s why Wall Street is so bullish on REE stock. Of the analysts providing a 12-month forecast for REE Automotive stock, their low estimate is $9.00, average estimate is $14.50, and high estimate is $20.00. This points to potential upside of 175%, 342%, and 500%, respectively.

Chart courtesy of StockCharts.com

About REE Stock

REE Automotive Ltd is an automotive design company based in Israel.

The company’s “REEcorner” technology integrates all traditional vehicle components (powertrain, suspension, drivetrain, steering, brakes, and electric drive motors) into the arch of the wheel, which carries the “REEboard” chassis. (Source: “Investor Presentation: October 2021,” REE Automotive Ltd, last accessed February 18, 2022.)

Because the company’s innovative products are scalable, they can be configured to meet the needs of automakers’ specific requirements. REE Automotive Ltd’s chassis provide more options than those of its competitors.

The company serves a $700.0-billion+ total addressable market: passenger cars (60%), e-shuttles and robotaxis (28%), light commercial vehicles (six percent), autonomous delivery vehicles (four percent), and mid-duty commercial vehicles (two percent).

Between 2021 and 2030, the EV industry is projected to expand at a compound annual growth rate (CAGR) of 31% from 3.1 to 34.7 million EV units.

REE Automotive Ltd’s global footprint currently covers the U.S., the U.K., Israel, Germany, and Japan. A few of the companies that it collaborates with are Magna International Inc. (NYSE:MGA), Mitsubishi Corp (TYO:8058, OTCMKTS:MSBHF), American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), and the aforementioned J.B. Poindexter & Co., Inc. and Hino Motors Ltd.

The company expects to have its first integration center set up in 2022 (in the U.S.), its second one in 2023 (in Europe), its third one in 2024 (in Asia), and its fourth one also in 2024 (location to be determined). By 2026, REE Automotive Ltd expects to have a network of 15 integration centers with an annual capacity of about 600,000 units.

Q3 Results

In the third quarter of 2021, REE Automotive reported a net loss of $414.9 million, compared to a third-quarter 2020 net loss of $18.8 million. (Source: REE Automotive Ltd, November 16, 2021, op. cit.)

The company attributed the wider net loss to a $409.8 million non-charge reflecting higher stock-based compensation. In the third quarter of 2020, the same charges were $14.4 million.

REE Automotive Ltd reported an adjusted net loss of $19.5 million, compared to $4.4 million in the same prior-year period.

On the plus side, the company said it had $394.5 million in cash, which it said was “sufficient to execute on its business plan.”

Daniel Barel, REE Automotive Ltd’s CEO and co-founder, commented, “We continued to execute our business plan, reaching significant milestones on both the demand and supply sides, keeping us on track or ahead of schedule on all major milestones.” (Source: Ibid.)

Analyst Take

REE Automotive stock is an excellent EV stock that is poised for serious growth over the coming quarters.

REE Automotive Ltd’s market-leading chassis and parts give it access to the enormous EV market, which includes the passenger, delivery, and commercial markets. While the company is currently burning through cash, it has enough capital to meet its goal of starting commercial production in 2023.