Hyliion Holdings Corp.

HYLN Details

Hyliion Holdings Corp. (NYSE: HYLN) manufactures electrified powertrain solutions for the commercial vehicle industry. HYLN aims to minimize the transportation sector's carbon intensity and GHG emissions by developing electrified powertrain solutions for Class 8 commercial vehicles. In addition, HYLN leverages its advanced software algorithms and data analytics capabilities that enable fleets to save fuel and operational costs while seamlessly integrating with their current fleet operations.

Launch of Hybrid eX: On August 31, 2021, HYLN announced the launch of Hybrid eX, an upgraded version of its Hybrid Systems, to be unveiled at the American Clean Transportation Expo in Long Beach, California. This improved model offers higher efficiency and payload capacity while also improving the driver's experience. HYLN expects to start deliveries of Hybrid eX in H2FY21.

Appointment of COO: On August 16, 2021, the company appointed Mr. Dennis M. Gallagher as its Chief Operating Officer (COO). Mr. Gallagher carries experience of more than 20 years in the areas of global manufacturing and commercial vehicles and has been tasked to oversee HYLN's commercialization process. Prior to this, Mr. Gallagher held the position of President at Jacobs Vehicle Systems, a supplier to the commercial vehicle industry.

Q2FY21 Results: In Q2FY21 (ended June 30, 2021), the company reported a 5.84x surge in loss from operations to USD 23.44 million vs. USD 3.43 million in Q2FY20, attributable to a 4.24x and 10.50x increase in R&D and SG&A expenses, respectively, combined with an absence of revenue. As a result, net loss for the quarter was USD 23.24 million, compared to USD 4.00 million in Q2FY20, aided by an interest income of USD 0.20 million. HYLN exited the quarter with a cash balance (including short-term investments) of USD 457.70 million and no outstanding debt.

Key Risks: HYLN's electrified powertrain systems rely on highly specialized and complicated software and hardware created and maintained internally or by third parties. These software and hardware may contain defects, bugs, or vulnerabilities that, if not rectified promptly, could lead to client loss, harming HYLN's reputation and its financials. In addition, the company sources most of its key components and raw materials from single-source suppliers. Therefore, any lag in the supply of the requisite quantity or unfavorable pricing could distort its production, negatively impacting the company's overall performance.

Outlook: As of Q2FY21, HYLN expects to commence generating revenue from the launch of a Hybrid product in H2FY21. It also forecasts incurring R&D and SG&A expenses in the range of USD 130 – 140 million for the entire FY21.

HYLN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HYLN's stock price decreased 23.90% and 31.00% in the past three and six months, respectively, and is currently trading in the lower band of its 52-week range of USD 7.69 to USD 57.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.71. Considering the correction in the stock price, strong balance sheet, recent launches, anticipated revenue generation in FY21, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 8.79, down 2.87% as of September 03, 2021, 12:31 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

American Public Education, Inc.

APEI Details

American Public Education, Inc. (NASDAQ: APEI) offers online and on-campus postsecondary education to ~91,500 students through its two subsidiary institutions, viz. American Public University System, Inc. (APUS) and National Education Seminars, Inc. (also known as Hondros College of Nursing - HCN). APEI earns its revenue from course registrations and enrollments, instruction services, tuition, and other fees. As of September 03, 2021, the company's market capitalization stood at USD 491.47 million.

Inorganic Growth Initiatives: On September 02, 2021, APEI acquired Rasmussen University, an institution primarily focusing on nursing and health science, for a cash consideration of USD 29 million. This acquisition is expected to double APEI's revenue to ~USD 600 million, and the combined entity will generate adjusted EBITDA of ~USD 90 million while serving ~11,000 nursing students. This news follows the earlier signing of an agreement to acquire Graduate School USA (GSUSA), which provides training to federal government employees, announced on August 11, 2021, for a total consideration of USD 1 million. GSUSA currently provides in-person and virtual training to 100 government agencies. The transaction is expected to close Q4FY21.

Academic Collaboration: On August 3, 2021, APUS announced its collaboration with Miami Dade College (MDC) to provide affordable higher education and guided academic pathways to underserved students. Under this alliance, both the partners will share their academic resources, student services, and faculty expertise to enable more students to pursue and finish relevant academic degrees.

Q2FY21 Results: The company reported a YoY decline of 5.01% in revenues to USD 78.01 million in Q2FY21 (ended June 30, 2021) compared to USD 82.13 million in Q2FY20. The American Public Education segment, which accounted for 85.74% of the total revenue in Q2FY21, reported a YoY decline of 9.05%, whereas the HCN segment improved by 29.44% YoY. Net income for Q2FY21 reduced to USD 0.53 million from USD 6.69 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 316.95 million and no outstanding debt.

Q2FY21 Financial Highlights (Source: Company Presentation, Q2FY21)

Key Risks: Service members of the US Armed Forces are entitled to receive Tuition Assistance (TA) from their branch of service. In FY20, students participating in TA accounted for 43% of APUS's adjusted net course registrations. Hence, any reduction or suspension of TA by the Department of Defense (DoD) to APUS could harm the company's financials. In addition, as a provider of postsecondary education, APEI is subject to strict federal and state regulations and accrediting agencies. It is mandated to comply with the comprehensive Title IV program regulatory requirements set by the Department of Education (DOE), non-observance of which could lead to the loss of program funding and could adversely impact the company's financials.

Outlook:

Operational and Financial Outlook (Source: Company Presentation, Q2FY21)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

APEI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: APEI's stock price decreased 16.86% in the past nine months and is currently trading in the lower band of its 52-week range of USD 24.75 to USD 39.19. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 49.19. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 32.58. Considering the correction in the stock price, recent acquisitions, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 27.02, up 2.78% as of September 03, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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