Getting Closer to Revenue By TipRanks
There have been some interesting companies that have listed in 2021 through a SPAC business combination. There has not been a shortage of electric vehicle companies to list.
Arrival (ARVL), seems attractive in the electric vehicle market. ARVL stock fell after being listed at $22.8 on March 20, 2021. ARVL stock traded at $13.03 last month at its lowest point of $10.40. (See ARVL stock charts on TipRanks)
Considering the addressable market and its business developments, ARVL stock seems positioned for further upside. As the market for commercial electric vehicles grows, I believe the stock is a strong buy.
Arrival boasts a diverse vehicle portfolio, including an electric bus, large electric van and electric van. By the company’s own estimates, the total addressable market for vans is $280 billion. Electric buses also have an addressable market potential of $154 billion.
It is clear that there is huge potential and Arrival may be able to take advantage of it.
Strong Growth in the Order Pipeline
It’s worth noting that Arrival expects electric bus production to commence in Q4 2021. The company’s large-sized electric van and electric van will be launched in the third quarter of 2022. It is possible that Arrival will still generate significant revenue.
However, the company’s order intake has been robust. This indicates the market’s potential. At the time of the SPAC business combination, Arrival reported orders worth $1.2 billion from United Parcel Service (NYSE:). This order includes 10,000 vans, with an option to add 10,000.
Last month, Arrival reported Q2 2021 results. The company’s non-binding orders and LOI has swelled to 59,000 vehicles.
Arrival Technologies (NYSE) and Uber Technologies have collaborated to create an electric car that will be used in the ride-hailing business. In Q3 2023, the first Arrival vehicle is scheduled to go into production. Other ride-hailing companies are also being considered by the company. The arrival company will have another market.
The Microfactory Approach
In terms of manufacturing, Tesla (NASDAQ:) has a Gigafactory approach. With a potential game-changing Microfactory strategy, Arrival enters the market.
The idea behind Microfactory is smaller production units that require less capital. According to Arrival, a Microfactory costs $44 million. The company currently has more than $450 million in cash reserves. It can be used for the establishment of ten microfactories.
This approach has the advantage that Arrival is able to establish a global presence. Further, with automation, the company’s Microfactory has a low break-even and lower number of employees per vehicle manufactured.
This approach is also useful for custom-made solutions to large orders. Already, Arrival is setting up microfactories across the U.S. and U.K. Depending on order backlogs, these factors could be established within six months in several locations.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, ARVL stock comes in as a Moderate Buy, with one Buy assigned in the past three months.
ARVL’s average target price is $20.00 per share. This implies that there are 53.49% upside possibilities from the current level.
Another interesting fact about Arrival is the company’s extensive focus on innovation. Arrival employs more than 500 engineers and has strong intellectual property. The company also collaborated with Ambarella (NASDAQ) last quarter to provide advanced driver aid systems.
Overall, Arrival has yet to generate revenue. The company does have a large order backlog which gives it growth visibility as soon as the microfactories begin production.
It’s also worth noting that United Parcel Services, Uber and Leaseplan are big entities with global presence. The initial van delivery might indicate that orders could be increased significantly.
After a significant correction, these factors make ARVL stock appealing.
Disclosure: Faisal Humayun had no position at the time this article was published.
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