(Editors' Note: This article covers micro-cap stocks. Please be aware of the risks associated with these stocks.)
ECOtality (ECTY) is a company building a nationwide charging infrastructure for plug-in hybrid and fully electric vehicles. It also manufactures the charging equipment it's using to build this network. The government originally funded it to support technologies that reduce carbon emissions. The general consensus, however, questions whether or not this company can survive on its own. Last year, it booked one profitable quarter, and recently its share price has been on the move upward. Over the last three years, its growth has shown an obvious trend. If it continues at the current rate, earnings per share could cross over into positive territory for the long term. With a market capitalization around $50 million, the profit potential for investors could be explosive.
Earnings Per Share Growth:
Click to enlarge(YCharts)
ECOtality's last financial statement showed it had $3.5 million in cash, $50 million in assets, and $37 million in liabilities. It's carrying long-term debt of $5 million with a debt to asset ratio of 10%. In June, it raised another $8 million from institutional investors. Its current institutional ownership is 24%.
A Government To Fall Back On
Not only is the company attracting institutional investors, but it will continue to have government support just in case it needs help along the way. Governments across the world are pushing for the mitigation of human induced climate change. Just like they built the interstate for the auto industry, now they're building the charging infrastructure for the EV industry (EV Project). Regardless of whether or not human induced climate change is true, governments worldwide have decided to take action "just in case." Take a look at the massive international effort to reduce carbon emissions; the ball is rolling full force and that's very unlikely to change:
International Programs On Climate Change
- United Nations
- United Nations Framework Convention On Climate Change
- Intergovernmental Panel On Climate Change
- China Policies On Climate Change
- China National Development And Reform Commission
- Indian National Action Plan On Climate Change
- Australia Department Of Agriculture
- Australian Climate Change Adaptation Program
- WWF Russia Climate Change Program
- European Environment Agency
- Europa International Program For Climate Change
- DOE - United States Department of Energy
- NOAA - National Oceanic And Atmospheric Administration
- NASA - National Aeronautics And Space Administration
- EPA - Environmental Protection Agency
Partners On Climate Change
Click to enlarge(United Nations)
Click to enlarge(Global Change)
When you start taking a close look at this company, you'll notice the progress is astounding. The rate of improvement shows it means business. Here are some accomplishments made this year alone:
- Georgia Power enables electric vehicle charging at work locations
- ECOtality's Minit Charger Unveils Revolutionary Minit Charger 12
- ECOtality and Sears Expand Relationship, Unveil Electric Vehicle Chargers in Tennessee and Arizona
- ECOtality and ChargePoint Establish Interoperability Company, Collaboratev, LLC
- ECOtality and Kroger Announce Expansion of EV Partnership
- Texas Instruments Introduces Workplace EV Charging with Blink Charging Stations
- ECOtality Unveils the Blink® HQ Family of Home EV Chargers
- ECOtality Raises $8.19 Million in Private Placement
- Blink and NovaCharge Announce Dealer Partnership
- IKEA To Grow Presence of Electric Vehicle Charging Stations With Units At 8 More Locations, Extending Reach Beyond The Western U.S.
- ECOtality to be Added to Russell Microcap Index
A Robust Line Of Products
ECOtality has been creating state of the art charging solutions for a vast array of industries. It has two main product lines: Blink and Minit. The Blink product line targets smart EV charging solutions for home and commercial use. It has installed over 12,000 DC fast chargers, 8,000 residential chargers, and over 3,000 publicly accessible charging stations. Potential locations for the Blink product line include: retail locations, restaurants, hotels, public parking areas, schools, apartments, office buildings, and airports. The Minit Charger product line is designed for industrial use. They recharge very quickly, as much as four to six times faster than conventional chargers. Their potential uses include: material handling, airline, automated guided vehicles, marine, and transit applications. Between these two product lines, no corner of this market has been left unturned:
Click to enlarge(Blink Network)
Click to enlarge(Minit Charger)
Ever-Growing Public Charging Network
ECOtality's public charging network is large and growing at a rapid pace. The only company with a larger network is ChargePoint, which would be a great investment if it wasn't private. Fortunately, ECOtality has partnered with ChargePoint. The joint venture is called Collaboratev, and each owns an equal 50% interest. It's designed to join the companies' two charging networks into one. The goal of this project is to make it easier for the consumer by providing an opportunity to create just one account that works on both networks, as opposed to creating a separate account for each charging network. Taking a look at the most recent 10-K filing, it states the purpose of the Collaboratev partnership is to:
"Provide electric vehicle drivers with easy access to participating charging stations using common authentication credentials."
"Enable single billing for all charging usage."
"Accurately provide aggregated electric vehicle charging station location data."
"Utilize open national interoperability standards to allow financial billing reconciliation services among electric vehicle charging networks."
ECOtality Public Charging Map - 3,899 Chargers And Counting!
ECOtality vs. Car Charging Group
Currently, ECOtality's primary competitor is Car Charging Group (OTCPK:CCGI). In my opinion, comparing the two is like comparing apples and oranges. ECOtality manufactures a physical product. It's building the charging network using equipment it creates. Car Charging Group purchases its equipment from companies like ECOtality and ChargePoint, which means it cannot survive without a charger manufacturer. Essentially, this makes Car Charging Group a middle-man. ECOtality's current profit margin is approximately -5% and steadily increasing. Car Charging Group's profit margin is approximately -15,000%. ECOtality's average revenue over the last three quarters was $14,000,000, whereas Car Charging Group's was only $13,000. And no, that's not a typo. In spite of all this, Car Charging Group still maintains a market capitalization of $95 million. Regardless of its scary financial statement, in my opinion the smarter investment would be in the company manufacturing a physical product.
Business Track Record Shows Tremendous Strength
Not only is ECOtality pushing the charging network forward at a rapid pace, but it's also cementing deals with major businesses such as Kroger (NYSE:KR) and Wal-Mart (NYSE:WMT). Since these companies have many stores across the nation, the growth potential is enormous. Because of the time it takes to recharge a vehicle, store-based charging stations are the obvious solution. Consumers can plug in while running their daily errands. Take a look at the following image of ECOtality's strategic customer base and think about the thousands of parking lots for potential charging spots:
The Hybrid Market Continues To Grow
If you take a look at hybrid vehicles currently on the market, it becomes apparent there are many more models becoming available. Almost every auto manufacturer produces several of them. When I drive around the city, I see these vehicles absolutely everywhere. Also, they are now available for many SUVs and trucks. Just five years ago, there was a limited number of hybrids being produced. Now, they are becoming more popular and there's a huge selection. Take a look at the hybrid and fully electric vehicles currently available on the market:
Click to enlarge(Edmunds)
Plug-In Hybrid And Fully Electric Vehicle Sales
Click to enlarge(Argonne National Laboratory)
Whether or not you believe fully electric vehicles are the future, the plug-in hybrid vehicle market continues to grow. These cars have proved their economic feasibility and will play a major role in the future. In the long term, it's now less expensive to drive a hybrid. And as the costs decrease, sales will continue to increase. Since battery technology is a significant by-product of the computer industry, it will further contribute to the EV industry. As technology improves, sales increase, and the charging network continues to grow; the success of ECOtality should naturally follow.
Disclosure: I am long ECTY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.