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Home invest in investing living frugal what to invest in ACTC (Proterra) DD - The Most Undervalued Stock on the Entire Market

ACTC (Proterra) DD - The Most Undervalued Stock on the Entire Market

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Topics to be Discussed:

  • Overview
  • Leadership
  • Board of Directors
  • Products, Services, and Technology
  • Partnerships and Customers
  • Competition
  • SPAC Transaction Overview
  • Financials and Fundamentals
  • Forward-Looking Statements and Speculation
  • Conclusion

Overview

"Proterra is a high-growth commercial electric vehicle technology leader with over a decade of production experience. The Company has designed an end-to-end, flexible technology platform that delivers world-class performance and a low total cost of ownership to original equipment manufacturers (OEMs) and end customers. Proterra has three complementary businesses:

  • Proterra Powered: Delivering industry-leading battery systems and electrification solutions to commercial vehicle manufacturers;
  • Proterra Transit: Leading North America as the market’s #1 electric transit bus OEM; and
  • Proterra Energy: Offering end-to-end turnkey charging and energy management solutions.

The Company’s industry-leading battery systems have been proven in more than 16 million service miles driven by its fleet of transit vehicles and validated through partnerships with world-class commercial vehicle OEMs, such as Freightliner Custom Chassis Corporation (FCCC), Thomas Built Buses, Van Hool, Bustech, and Optimal-EV. To date, Proterra has produced and delivered more than 300 megawatt-hours of battery systems, more than 550 heavy-duty electric transit buses and installed 54 megawatts of charging systems.

Proterra operates manufacturing facilities in California and South Carolina, as well as a state-of-the-art R&D lab in Silicon Valley. The Company recently announced the opening of a new battery production line co-located in its electric transit bus manufacturing facility in Los Angeles County. This battery production line was established within a year and demonstrates Proterra’s ability to bring its scalable and capital-efficient battery manufacturing process directly to commercial vehicle OEMs alongside their existing manufacturing." Pulled from investors portal on Proterra's website.

Proterra is going public via a SPAC merger ticker ACTC. A press statement released on January 12th, 2021 suggests that the merger is "expected to close in the first half of 2021". There is some speculation regarding the date; they’ve already filed the S-4, so the timeline for merger vote looks to be around end of March to April first week according to this post and the SEC website.

Investors:

Franklin Templeton, Broadscale, 40 North, G2VP, Chamath Palihapitiya, and Fidelity Management & Research Company LLC

Funds and Accounts Managed By:

BlackRock, Neuberger Berman Funds and affiliates of ArcLight.

Leadership

  • Jack Allan, CEO, from Navistar and Valspar
  • Amy Ard, CFO, from AMG, PCC, and PWC
  • Dustin Grace, CTO, from Tesla and Honda
  • John Ensign, COO, from Tesla and Honeywell
  • JoAnn Covington, CLO, from EA and Rocket Fuel
  • Gareth Joyce, President, from Delta and Mercedes-Benz
  • Rick Huibregtse, Sr. VP Engineering, from Remy and Delphi
  • John Walsh, Sr. VP of Sales, from Rev and Davey Coach

Board of Directors

  • Jack Allen, Chairman from Navistar and Valspar
  • Ryan Popple, Co-Founder and Executive Director from Tesla and KPCB
  • Jake Erhard, Direct Nominee from ArcLight and Schroders
  • Jennifer Granholm, Director Secretary of the DoE and CNN
  • Constance Skidmore, Director from PWC
  • Mike Smith, Director from Constellation
  • Brook Porter, Director from G2VP and KPCB
  • Jeannine Sargent, Director from Flex and Aerlikon

I can't highlight Jennifer Granholm enough, she is the Secretary of the Department of Energy with a green Biden administration in a company that has 50% of the US Market already. Her CNN ties could prove to be an excellent source for PR as well.

Products, Services, and Technology

As mentioned in the overview, the company really operates in 3 capacities: Proterra Powered, Proterra Transit, and Proterra Energy.

Proterra Powered: Delivering industry-leading battery systems and electrification solutions to commercial vehicle manufacturers.

Proterra Transit: Leading North America as the market’s #1 electric transit bus OEM.

  • ZX5 - Transit Bus
  • S1LF - Shuttle Bus
  • ZDi - Transit Bus

Proterra Energy: Offering end-to-end turnkey charging and energy management solutions.

Partnerships and Customers

Partners: Key strategic partnership with Daimler

Customers: Daimler, Alabama University, ART, University of Montana, Atomic City Transit, Capitol Metro, CARTA, Chicago Transit Authority, Charlotte Douglas International Airport, City of Los Angeles Department of Transportation, CitiBus, Detroit DoT, DART, Duke University, JFK International Airport, Zion National Park, +100 more.

Their customers range from transit authorities, DoT's, airports, schools (high school/college), and cities.

Two weeks ago they had the largest EV bus deal in the US struck with Maryland.

Competition

Arrival, Hyllion, Nikola, Romeo.

Proterra has an extremely large lead and has a distinct first mover advantage. The second place competition (Romeo) is still lagging far behind Proterra.

Real World Miles Driven: Proterra has driven over 16mm real world miles, no other competition has driven any.

Revenue (2020E): The only other competitor to generate mentionable revenue was Romeo with $11mm. Proterra generated $193mm

Production Track Record: Again, Romeo is the not-so-close second having produced minimal items and being founded in 2016. Proterra has been in production for ~10 years.

Manufacturing Capacity (As of 01/01/2021): Only Proterra and Romeo.

Full Charging Solution (As of 01/01/2021): Proterra only

SPAC Transaction Overview

  • Transaction reflects a $1.6Bn value for Proterra
  • Proterra to receive ~$648mm cash at closing
  • Proterra shareholders to roll 100% of their shares, expected to own ~69%
  • $2.4Bn pro forma equity value
  • $1.6Bn pro forma enterprise value
    • 3.6x 2022E revenue of $439MM
    • 0.6x 2025E revenue of $2,566MM
  • ~$852MM cash on hand at close
  • The transaction has been unanimously approved by the Boards of Directors of both Proterra and ArcLight Clean Transition Corp.
  • Expected to close "first half of 2021", aforementioned above that predictions expect voting to happen in the last week of March/first week of April.
  • Form 8-K

Financials and Fundamentals

All data derived from SEC forms and the investor presentation.

  • EBITDA: 21%
  • 2025E Free Cash Flow: $390MM
  • '20E-'25E CAGR: 68% (Peer median 37%)
  • '22E-'25E Scaling Gross Margins: 13-25% (Peer median 23%)
  • '21E Valuation: 6.5x (Peer median 16.2x)
  • '22E Valuation: 3.6x (Peer median 10.3x)
  • These are very attractive valuations considering the growth compared to peers.
  • Trading Median (as of January 2021): 1.6 transaction value/trading value (Trading median 3.1)
  • Revenue '21E: $246MM (Peer median $120MM)
  • Implied Enterprise Value of Publicly Traded Mobility Tech Leaders: $4.7Bn
  • Implied Enterprise Value of Publicly Mobility SPAC Transactions: $4.3Bn
  • Implied Enterprise Value of Proterra: $1.6Bn

Let's do a little evaluating ourselves:

Shares outstanding post-merger: 240.1MM

Based on January ACTC prices pre NASDAQ sell-off: $24/share

  • 240.1MM * $24/share = 5.76Bn Market Cap
  • Let's find Proterra's value here without the SPAC shenanigans.
  • 5.76Bn - $852MM = 4.91Bn Market Cap without SPAC cash
  • 2022E estimated revenue is 439M
  • 2022E adjusted .7561 for present value is 332M
  • So unadjusted EV/Rev = 11.18
  • And adjusted EV/Rev = 14.78
  • Competitor EV/Rev = 10.3x on average for 2022E
  • Proterra claims an 84% premium
  • 1.84 * 10.3 = 18.95
  • So the industry metric is 18.95x.

UNADJUSTED:

  • 439 unadjusted x 18.9 = 8.3B
  • Add the cash from the SPAC: $852mm
  • $9.162Bn unadjusted market cap
  • 9.162/240.1 = $38.16 unadjusted
  • 9.162Bn - 5.76Bn = 3.402Bn undervalued

ADJUSTED:

  • 332 * 18.9 = 6.274Bn
  • Add the cash from the SPAC: $852mm
  • $7.126Bn adjusted market cap
  • 7.126/240.1 = $29.58 adjusted
  • 7.126 - 5.76 = $1.366Bn undervalued

Average between adjusted and unadjusted:

  • Dollar value: $2.384Bn undervalued
  • Fair share price: $33.87

Here is another analyst finding it undervalued in a similar way on Feb 10th.

Let's think about that for a moment...

As of this writing ACTC is trading at $15.65, based on purely fundamentals without speculation it is trading 116.42% below it's actual value.

Forward Looking Statements and Speculation

Conclusion

Proterra is not only the most undervalued stock on the entire market, it's also positioned to be one of the best performing companies over the next several years. With an incredible first-mover advantage (16mm driven/10 years production) and a massive lead on the market (50%+ US market share), there is nothing stopping this stock from absolutely exploding post-merger which is expected to happen end of March-first week in April (although the official statement is "the first half of this year").

The company is currently undervalued by 116.42% on fundamentals alone, and that's on the "fair" end. When people realize what is actually happening here and what this is about to become, I think the hype and excitement has the potential to drive these prices much higher. I see a TSLA situation brewing. No not because it's just another EV company, because it's an established, well-connected, constantly growing commercial EV company.

Bear Case: I literally can't think of one aside from the merger falling apart. If someone could provide a bear case in the comments for Proterra (assuming the merger is successful) I would love to discuss it, because either I'm missing something glaringly obvious or this might be my greatest pick.

How to Play?

I am long on this with my shares. I will be holding all my shares for several years, my calls I will exercise half after the merger and sell the rest for a nice profit. If you want to just play the merger that's an option too. Meaning just hold until the merger date and sell at whatever you think the peak is that very day.

  1. Buy shares, ACTC will change to PTRA after the merger. Shares will be 1:1
  2. Warrants, ACTCW, if you're not familiar how warrants work they are essentially call options with a fixed strike price of $11.50
  3. Calls, I think virtually anything listed is going to print (aside from 03/19)
  4. Selling puts, the premiums are hefty so either you'll get a nice premium or you'll own some shares at a really nice discount.

Positions:

3,865 shares @ 22.37

10C 04/16 $20.00

12C 05/21 $22.50

17C 05/21 $25.00

6C 08/20 $35

TL;DR: Fundamental's alone show this company is already 116.42% undervalued, factor in hype, forward-thinking, IPO, etc. and I can't even come up with a PT. I would expect a PT post-merger to travel upwards to ~$50-$60 and settle back down no lower than $34. EOY my prediction is ~$70-$80. 2025 prediction is ~$300-$500. I recommend you read. I wouldn't want to gloss this one over if I were you. If you prefer you could simply check out their investor presentation.

Disclaimer: I am not a financial advisor, nothing I ever say or do is a financial recommendation. Any words urging someone to do something is only going as far as suggesting they do their own DD, it is in no way an attempt to convince anyone to make any financial decisions. Plus...this thing doesn't need to get pumped. I'm just trying to share the find.



Submitted March 08, 2021 at 09:13PM by hooman_or_whatever https://ift.tt/3qtuOcS
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