Volta Stock Forecast: Will It Burn Cash?

Volta Stock Forecast: Electric vehicles (EVs) aren’t new to the automotive industry, but until recently, they struggled to gain widespread acceptance. While consumers showed interest in the idea of ditching gasoline, most found that the disadvantages of EVs outweighed their advantages.

The biggest issue was range – how far EVs could go before needing to recharge. Many trips were out of the question because there were no charging options and the round trip was more than a standard battery could handle.

The solution was twofold.

First, manufacturers focused on developing more powerful batteries to extend vehicle range. Second, public and private organizations organized an expansion of EV infrastructure to ensure drivers had options for recharging no matter where their travels took them.

Several companies took on the challenge of building comprehensive EV charging networks, including Blink Charging, ChargePoint, and EVGo. However, these companies have lots of competition from smaller businesses like Volta that are working hard to capture their own portion of the rapidly-growing charging station market.

Volta Growing Rapidly

Volta Charging is one of the most-watched electric vehicle infrastructure companies due to its rapid growth and innovative methods of generating revenue from its charging stalls.

In addition to giving EV owners convenient access to charging connections, Volta’s stations are built with screens. Volta has partnered with a variety of advertisers to create engaging content for those screens, and the advertisers are willing to pay handsomely for the privilege of being featured in Volta programming.

As of first quarter 2022, Volta’s geographic footprint included 26 states in the US. The company has installed charging stations at 800 sites – that’s 2,548 total stalls and 4,695 screens – with thousands more in the planning stage. Outside of the US, Volta has stations in France and Germany, with more to come.

Though it is tiny relative to ChargePoint and EVGo, some analysts expect Volta to triple in value over the next year. However, the picture is less clear from a short-term perspective, and Volta stock is down roughly 80 percent year-to-date.

Why did Volta stock drop? What does that mean for investors? Is VLTA a good stock? Specifically, is Volta stock a buy or sell?

Volta Revenues

Volta reported its first quarter 2022 results in May, and the numbers painted a picture of a company that is growing quickly. First-quarter revenue increased 77 percent year-over-year for a total of $8.4 million. Most of that came from media revenue, which increased 73 percent year-over-year for a total of $6.1 million.

The number of charging stations that are fully installed has grown 39 percent as compared to first quarter 2021, and Volta has captured new advertising dollars from major partners like T-Mobile, Zoom, and Showtime. That’s in addition to existing partnerships with Disney, Aetna, and PepsiCo.

The company’s efforts towards its mission of offering “EV charging at the places you like to go” has paid off. Volta now has stations located at Tanger Outlets and Six Flags. It has expanded its relationship with Walgreens, and there are now 1,000 Volta charging stalls at 500 Walgreens locations.

Recently, Volta announced plans to expand its partnership with Kroger grocery stores. There are already Volta charging stalls at 16 Kroger locations in two metropolitan areas. By the end of the year, Volta expects to have Kroger charging stations in six more geographies.

EV Car Market Is Massive

EV sales are growing rapidly, and demand for charging stations is rising in lockstep. Consumers are still interested in reducing dependency on fossil fuels for environmental reasons, but now the high price of gasoline has inspired a new demographic to consider making the switch to hybrid and fully electric vehicles.

By one estimate, the electric car market was worth approximately $105 billion in 2021, and it is expected to hit $354 billion by 2028 – a compound annual growth rate (CAGR) of 19 percent. The electric vehicle charging station market, worth just $9.47 billion in 2020, is expected to hit $142.46 by 2030. That represents a CAGR of 31.14 percent.

Volta expects to benefit from industry growth in 2022. During the first-quarter earnings call, leaders gave second-quarter revenue guidance of $13 million to $14 million. Full-year guidance remained unchanged from the figures given during the fourth-quarter/full-year 2021 earnings call: full-year revenue between $70 million and $80 million, with a total of 1,700 to 2,000 stations at 650 to 750 sites.

Will Volta Burn Through Its Cash?

Despite the growth reported for the first quarter, Volta stock continued to drop after the earnings call. That’s because the earnings report included signs that all is not well from a financial perspective.

Selling, general, and administrative expenses more than doubled year-over-year from first-quarter 2021’s $15.3 million to $39.7 million.

Volta’s net loss improved year over year. The company reported a net loss of $48.1 million for the quarter compared to a loss of $65.2 million for the first quarter of 2021. However, the adjusted EBITDA came in at a loss of $41.4 million for the quarter, which is significantly higher than the prior year’s $15.9 million loss.

From a big picture perspective, Volta’s cumulative losses as of March 31, 2022, totaled $476.9 million, and the company’s cash balance was just $205 million.

That’s a precarious situation that can’t be sustained for long. Volta leadership knows that the company is in financial trouble, as evidenced by its remark in a regulatory filing “that there is substantial doubt about the company’s ability to continue as a going concern in the next 12 months.”

At this point, Volta stock is trading below $2 per share. Its 52-week low was down to $1.22 per share in late May and hasn’t risen much since. That means Volta is at risk of its stock being delisted from the New York Stock Exchange, which will create additional challenges when it comes to raising capital.

Volta Stock Forecast: Buy or Sell?

It’s possible that Volta will turn things around from a financial perspective, and Volta stock may go on to reach new heights. However, given its current financial situation, any investment in Volta is fairly speculative.

Investors willing to take on that risk may see impressive returns if the company regains its footing, but generally speaking, VLTA is not a good stock for the average portfolio.

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