Xos Inc: Wall Street Says Ignored EV Stock Could More Than Quadruple

Why Xos Stock Will Likely Rise

Xos Inc (NASDAQ:XOS) is an electric vehicle (EV) stock that has been catching the attention of Wall Street. The company has been around for five years, but it only went public in August of this year through a business combination with NextGen Acquisition Corp.

Xos Inc has made a lot of noise over the last five years, but it’s often outshouted by louder EV companies like Tesla Inc (NASDAQ:TSLA). Unlike Tesla, though, Xos has its fingers in virtually every conceivable EV pot.

Xos produces commercial EVs for last-mile service. It’s a niche sector with a total addressable market of $100.0 billion.

With the company’s first-mover advantage, it’s conceivable that this plucky startup will generate billions of dollars in revenue over the coming years and help get some of the dirtiest commercial vehicles off the road.

About Xos Inc

Los Angeles, CA-based Xos is an EV company that designs and develops electric battery systems for commercial fleets.

It focuses on medium-duty and heavy-duty commercial vehicles that travel on last-mile routes. These urban vehicles are part of the last stage of the delivery chain and make many starts and stops throughout the day.

Delivery trucks, armored vehicles, and other heavy work vehicles typically travel between 100 and 150 miles per day. This is the ideal range for Xos Inc’s “X-Platform 1” vehicles, which are designed to accommodate a variety of medium-duty bodies, wheelbases, and range requirements up to 200 miles.

Because Xos is focused on urban vehicles, not long-haul trucks, its vehicles have easy access to mobile charging stations. It only takes about an hour to recharge the batteries.

Xos Inc’s “Fleet-as-a-Service” package offers its customers a suite of commercial products and services to facilitate electric fleet operations and change their traditional combustion-engine fleets to EV fleets. Management says this will significantly increase the company’s lifetime revenue per vehicle.

Companies that have deployed Xos Inc’s battery systems include United Parcel Service, Inc. (NYSE:UPS) and Loomis.

Partnership With Thompson Truck Centers

In February, Xos Inc announced that it partnered with Thompson Truck Centers to get more EVs on the road faster. (Source: “Xos Trucks Partners With Thompson Truck Centers, Secures Truck Order,” Xos Trucks, Inc., February 11, 2021.)

The deal includes an initial order of 100 trucks in 2021, with a mutual goal of up to 1,000 trucks over the next three years.

Order From Wiggins Lift Co.

In June, Xos announced new powertrain orders from repeat customer Wiggins Lift Co., Inc., bringing the total number of powertrain systems to be delivered to Wiggins this year to 38. (Source: “Xos, Inc. Announces New Powertrain Order From Wiggins Lift Co., Inc.” Xos Inc, June 10, 2021.)

Wiggins Lift Co., Inc. initially ordered 20 powertrain systems, 14 of which had been successfully deployed as of June.

If all continues to go well, it’s expected that Wiggins will place additional orders.

Order From FedEx Ground

In August, Xos announced a new order from FedEx Ground (NYSE:FDX) to deliver 120 zero-emission, medium-duty electric trucks to 35 different FedEx Ground operators in five states (California, New York, New Jersey, Massachusetts, and Texas). (Source: “FedEx Ground Operators Order 120 Xos Trucks for 2021 and 2022 Delivery,” Xos Inc, August 9, 2021.)

The vehicles are expected to be delivered in the fourth quarter of 2021 and in 2022.

Sales Projected to Soar by 2025

Since Xos is a startup, it’s just beginning to ramp up its sales. In 2020, the company delivered an estimated 17 vehicles. That number is projected to hit 116 by the end of 2021, 2,007 in 2022, 8,715 in 2023, 20,427 in 2024, and 33,674 in 2025. (Source: “Investor Presentation: February 2021,” Xos Inc, last accessed October 29, 2021.)

The company already has a unit backlog of more than 2,000 orders and 4,000 optional orders.

This includes the previously mentioned order from Thomson Truck Centers. Xos Inc also has a purchase and distribution agreement for 1,000 vehicles from Lonestar Truck Group, a key partner for large corporate parcel delivery fleets such as FedEx Ground.

Xos expects to manufacture its vehicles at smaller plants located closer to its customers and body distributors.

To that end, Xos Inc has a multiyear manufacturing partnership with Metalsa, a truck and auto frame supplier and strategic investor in Xos, for frame rails and chassis components.

While some investors might believe that it will take time for EVs to really take off, especially in the U.S., Xos Inc is uniquely positioned to take advantage of state-level rules that will see EV commercial sales explode.

California, for example, has created new regulations that would see diesel-powered trucks and vans extinct by 2045. (Source: “Advanced Clean Fleets,” California Air Resources Board, last accessed October 29, 2021.)

Yes, that’s more than 20 years away, but it’s not as if all those vehicles will be on the road until 2045. They will be phased out, starting over the next couple of years.

The initial focus of California’s regulations is on large fleets with vehicles suitable for electrification. Starting in 2024, the California Air Resources Board will be limiting the number of diesel-powered vehicles that manufacturers can sell in the state.

Those limitations will keep increasing until 2045, when all new Class 2 to Class 8 vehicles sold in California must be zero-emission. 

It’s a win-win for Xos Inc. Even Wall Street is on board, which is encouraging, especially when you look at Xos stock’s current price chart.

Chart courtesy of StockCharts.com

The above chart’s not spectacular, but Xos stock’s projected growth is.

Of the analysts providing a 12-month share-price forecast for Xos, their average target is $15.50, with a high estimate of $22.00. This points to upside for Xos stock of 239% and 382%, respectively.

Analyst Take

Xos Inc is an overlooked EV company that’s poised to be a front-runner in the billion-dollar medium-duty and heavy-duty last-mile and return-to-base vehicle sector. 

The company’s vehicles are already on the road with Loomis and United Parcel Service, and Xos has announced additional partnerships and sales. The company is in its infancy and uniquely positioned to capture the burgeoning EV market.

All that is positive news for Xos stock investors.