Skeptical on the market for electric cars, Janney Capital analyst John Roy today launched coverage of Ener1 (HEV) with a Sell rating, while starting A123 (AONE) at Neutral. Both companies make car batteries used in electric and hybrid vehicles.
Roy predicts that the electric vehicle battery stocks are headed for a pull back this year “as the timeline for electric vehicles lengthens.” In short, he thinks the merits of fully electrics cars are overblown, for four reasons:
- They pollute more than regular cars. Roy says that a National Academy of Sciences study finds that even by 2030, internal combustion engine cars will be 9% cleaner than full-battery electric vehicles, and 17% cleaner than plug-in hybrids.
- They cost more than regular cars.
- They have less range than regular cars.
- The battery performance deteriorates in cold weather.
Here’s are brief excerpts on his reports on HEV and AONE:
- HEV: “While Ener1 has some impressive technology, solid management with strong automotive pedigrees and a growing list of high profile potential customers, we do not believe that the company will overcome the substantial hurdles facing mass adoption of electric vehicles and will therefore under-perform for some time,” he writes.� Roy notes that the company’s current customers on his “least favorite” segment of the market – fully battery electric vehicles, which he thinks will be a lot less popular than hybrids. His price target on the stock is $3.50, well below yesterday’s close at $4.85.
- AONE: His more neutral stance on AONE reflects his view that “diversification of end market opportunities” will offset the issues he sees in the electric car market. He notes that A123, unlike ENER1, is more focused on hybrid cars than pure electrics. His target price is $14, a hair above yesterday’s close at $13.64.
In today’s trading:
- HEV is down 38 cents, or 8%, to $4.35.
- AONE is up 4 cents at $13.78.
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