Is Polar Power Stock a Buy?

Polar Power Inc (NASDAQ:POLA) has been involved in providing electricity and climate control to remote areas of the world for nearly half a century

Their products have been integrated into a variety of applications for military, telecommunications, and marine power usage. Of course, cash is power in today’s post-coronavirus market, and Polar Power generated investor interest when it announced gains of $2.8 million through its private investments in July 2020.

The company also sold an aggregate of 1,250,000 shares of common stock to gain working capital for its operations during the remaining half of a turbulent year. It’s a move that begs the question – is Polar Power Stock a buy?

While you may not hear much about it in the news because of its mostly B2B revenue model, the company has a global footprint in sustainable energy generation and storage. This makes it a powerful player in a utility industry that’s been traditionally rigid in adapting to change.

Electricity is arguably your most important utility, as it powers food refrigeration/cooking, climate control, internet access, and more. With a push to smart-home technology and electric/hybrid vehicles, it’s only getting more vital.

Let’s look at why some investors are betting on Polar Power to adapt to the new marketplace before other larger players.

Polar Power Is A Spinout Of NASA & WHO Partnership

Polar Power in an American company founded in 1979 with the creation of a solar-powered fridge/freezer that could be used to store vaccines in remote areas.

It was created in partnership with NASA and the U.S. Agency for International Development to support a World Health Organization. From there, it expanded alongside the push for worldwide sustainable power generation and storage in both land and sea applications.

This includes DC generators, hybrid power, rapid power, and large-scale Lithium Ion Iron Phosphate battery banks and battery management systems.

At the start of 2020, it received an Environmental Protection Agency (EPA) certification to use Toyota 1KS natural gas and LPG engines in its systems.

These fuel-efficient engines are vital for hybrid systems that continue power generation during times the sun isn’t strong, such as during the evening, cloudy weather, and winter hours. It also shows its focus on the smaller 40 kilowatt (kW) prime power market that’s underrepresented by legacy grid-tied providers.

Is Polar Power Stock a Buy?

Solar power is much more commonplace globally in 2020 than it was at the start of the 21st century. This is because it’s more affordable to install, with an estimated 62.5 gigawatts (gW) installed in the United States alone, according to the Department of Energy.

Even in major metropolitan areas, it’s useful – the DoE estimates covering only 0.6% of land with solar panels can power the entire country. Much of this land is already in residential, industrial, and commercial use.

Companies with large real estate footprints – like Walmart, Amazon, Target, and Apple – have rooftop and covered parking installations that generate a massive amount of power. Many cities are also installing solar, as are wireless telecommunications companies who have large networks of cellular towers, often in remote areas.

Residential backup usage, which is one area Polar specializes in, is an ideal solar application.

A typical gas generator would only last half a year before service is needed and parts replaced, with oil changes needed every other week. Polar’s hybrid solution, on the other hand, is a cost-effective solution that can be used in both off-grid and grid-tied systems.

The push to a fully sustainable solution is fueling a lot of investor interest, and Polar’s existing revenue channels helped it quickly recover from 2020’s unprecedented economic turmoil.

Risks of Investing in Polar Power

Of course, just because solar is hot doesn’t mean Polar is the company to bring it – the company has a lot of competition, both foreign and domestic.

Tesla [NASDAQ:TSLA] alone is one of the biggest solar manufacturers and installers in the United States, which includes residential/commercial assets acquired when it bought Solar City, along with the largest vehicle charging network in its SuperCharger.

Unlike Polar, Tesla also has consumer brand recognition and was on an upward trajectory long before the COVID-19 crisis.

Should Polar grab enough market share, Tesla as the capital to either purchase it outright or choke it out of the market. Solar companies like NextEra Energy [NYSE:NEE], First Solar [NASDAQ:FSLR] and SolarEdge [NASDAQ:SEDG] all have considerable holds in the market.

This makes it difficult to build a sustainable business in sustainable energy, and it’s unclear if Polar Power will continue successfully transitioning or if investors will give it the cold shoulder.

Polar Power Vs Elon Musk

Although it’s certainly not a one-man operation, Polar Power has several large competitors in the sustainable energy market. It needs to emulate Tesla’s vertical integration.

As you may remember from our prior company breakdown, Tesla manufactures solar panels, batteries, electric vehicles, and EV refueling stations.

This vertical integration gave it the car, the fuel, and (through its sister The Boring Company, which shares CEO Elon Musk) the roads.

It’s not a question of whether or not a company like Tesla can beat Polar Power, because it already has. The real question is how Polar will sustain its market advantage over the next 50 years, something that hasn’t yet been proven. Its market value has been on a downward trajectory for years.

The end is not near for the company or its investors, who will surely gain a windfall should the company ever execute on a successful exit.

Polar Power Stock Forecast: The Bottom Line

Polar Power isn’t as popular as its larger competitors, and it lacks the vertical integration of a company like Tesla. It does have a track record of successful contracts, ranging from corporations to the U.S. military and other government agencies around the world. This helps it generate enough revenue to grow, which it’s currently collecting financial capital to do.

If the company is successful in continuing to grow despite the drastic impact of COVID-19 on the global economy, Polar Power can be a health investment. Its only other option from an investor standpoint is to create a successful niche that positions it for buyout, either by a larger competitor or another conglomerate looking to enter the market.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.