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James Stafford

James Stafford

James Stafford is the Editor of Oilprice.com

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A Unique Way To Play The Coming $700 Billion Electric Vehicle Boom

Boat

The global electric vehicle market is a crowded space valued at nearly $194 billion in 2022 and set to reach an astounding $694 billion by 2030

Now it’s time to find more unique opportunities as many of these smaller car manufacturers find the market being overtaken by the traditional auto giants like Ford, Chevy and GM. 

Opportunity abounds, but phenomenal cash burn and a slower path to profitability have rendered this crowded space rather risky.

But the EV market isn’t just about the roadways …

The waterways are going electric, too, and the playing field is much less chaotic, with the clear first-mover advantage going to Vision Marine Technologies (NASDAQ:VMAR), with its proprietary PowerTrain outboard motor and the launch of the fastest electric speedboat in its class on the market. 

The electric boat market is set to grow at a CAGR of nearly 13%. By 2030, this market will be worth almost $15 billion, and it's much easier to navigate. 

As we speak, the multi-billion-dollar boat battery market is undergoing its biggest transition since the invention of the boat motor itself. 

And VMAR has successfully developed the world’s most powerful marine electric motor, with proprietary technology. First revenues from the PowerTrain are coming this year, along with a second revenue chain in the form of a disruption to the boat rental market.

Sailing legend Ian Bruce is behind VMAR, and unique among EV offerings, the company has zero debt and is positioned to be free-cash-flow positive in 2024.

That’s a good starting point for an electrified market that has few (if any) players who aren’t burning cash at an untenable rate. 

The Proprietary Tech Powering Clean Boating

The newly unveiled H2e Bowrider speed boat took the Paris Boat Show by storm in December, and made its official debut in February in Miami, with deliveries to start this summer. 

The boat, developed in partnership with Four Winns, is special because it showcases VMAR’s E-Motion 180 HP electric outboard motor.

That motor, with proprietary PowerTrain technology, makes the H2e Bowrider the first all-electric series production bowrider on the market.

The E-Motion is the first fully electric, production-ready, high-performance 180 HP, which makes it the key market disruptor. With its proprietary technology, which includes the batteries, the engine and the software, Vision Marine’s E-Motion is now the only turn-key solution for boat manufacturers in its class. That’s a strong first-mover position to be in at the critical junction of a high-dollar energy transition. 

Vision Marine’s (NASDAQ:VMAR) E-Motion fully charges overnight with no additional infrastructure, has the highest horsepower engine in its class on the market, offers the first-ever custom design marine battery packs, and it all comes in at a lower cost than any competitors: 

Now, it’s all about capturing market share, and that’s where it gets interesting. 

How close are they? Well, the plan is to market the E-Motion Powertrain to Original Equipment Manufacturers (OEMs) rather than the public, and they have already received dozens of advance orders.

And investors will get to see the first revenues from PowerTrain this year already.

Flipping the Switch on the Boat Rental Market

VMAR has a broader vision beyond the most powerful outboard electric motor in its class, too: They also plan to flip the boat rental market and turn it electric. 

That $5-billion+ boat rental market (think: thousands of resorts and marinas worldwide) is ripe for flipping, and VMAR’s flagship Newport business managed to serve 300,000 clients in the first three years, annualizing $4 million in revenues with a 35% profit margin. 

For 2023, Vision Marine will be rolling out two more fully-owned electric boat rental locations and launching their franchise model. By 2024, it’s full speed ahead with scaling. 

The company’s proprietary technology gives it the opportunity to become one of the NASDAQ’s most exciting EV plays.

By the end of 2024, Vision Marine expects to free-cash-flow positive, and by 2025, it expects to have two profitable and growing divisions, after which the scaling is expected to gain further momentum. 

Zero Debt at a Time of Serious Electric Cash-Burn

This summer should be interesting on the water.

Vision Marine (NASDAQ:VMAR) not only has developed the most powerful electric motor solution on the recreational boating market, but it’s also a member of an elite club in this segment that has proprietary technology, zero debt and clear growth runways. 

With investors pouring money into anything electric in the wake of a major European push for zero-carbon and the Biden administration’s clean energy-friendly Inflation Reduction Act (IRA), a company that has already staked its claim on the market with a proprietary tech product and is going into its first major expansion push with zero debt has more than just first-mover advantage. 

Other tech companies investors should also be taking a look at:

Applied Materials (NASDAQ: AMAT): Applied Materials is an often overlooked powerhouse in the chip manufacturing and research industry. As a leading chip fabrication equipment maker, the company designs, manufactures, and sells complex machinery utilized by chip fabs - factories dedicated to semiconductor production. The company is currently the largest chip fab equipment provider in the sector and recently announced its plans to invest up to $4 billion over seven years in the creation of the EPIC Center—a facility aimed at testing new semiconductor technology and fostering collaboration across the industry. Notable partners expressing excitement about this initiative include Nvidia, Taiwan Semiconductor Manufacturing, AMD, Intel, and prominent universities such as MIT.

While many chip stocks have experienced significant price surges, Applied Materials has not skyrocketed to the same extent. As of now, its shares trade at a modest 18 times trailing-12-month earnings per share (EPS). Although chip fab equipment spending has slowed this year due to economic uncertainties, Applied Materials has adapted by focusing on high-growth segments such as chip fabs for electric vehicles and industrial technology. In its most recent quarter, the company reported a 6% increase in revenue and a 7% rise in EPS year over year.

Alphabet Inc. (NASDAQ: GOOGL): Regardless of its recent slowdown in revenue growth, Alphabet has seen its shares rise by 40% in 2023, indicating positive market sentiment. The latest data shows that Google Search commands an impressive 92.8% share of the market while Google Cloud Platform (GCP) is gaining traction, outpacing competitors like Amazon Web Services in revenue growth. With a diverse client base and the potential for increased profitability, GCP is poised for further success in the expanding cloud market. Alphabet's culture of innovation, demonstrated by its integration of AI into various products and ventures like Waymo's autonomous driving, ensures the company remains at the forefront of technological advancements.

Alphabet's strong financials, including substantial free cash flow and a robust balance sheet, limit downside risks despite global economic uncertainty. With multiple growth drivers, such as digital advertising, cloud infrastructure, and streaming services, Alphabet's diversified revenue streams provide a solid foundation for future growth. Its shares are currently trading at approximately 17 times its projected earnings in 2024, a price that looks attractive with its projected annual increase of over 16% in per-share profits over the next five years.

Apple (NASDAQ: AAPL): With a market capitalization of $2.8 trillion, Apple is Berkshire Hathaway's largest equity holding. Its services segment, which includes offerings like Apple Music, Apple Pay, and Apple TV+, has been experiencing remarkable growth, with revenue totaling $20.9 billion in the most recent fiscal quarter. This burgeoning services segment not only benefits Apple's financials with its impressive gross margin of 71%, but it also contributes to the company's customer loyalty. The seamless integration of Apple's hardware and software ecosystem, coupled with its vast user base of over 2 billion active Apple devices, fosters a sense of stickiness among consumers, making it challenging for them to switch to competing platforms.

Another compelling aspect of Apple is its proven pricing power, a hallmark of successful companies. Apple has consistently raised prices for its flagship product, the iPhone, without any significant impact on demand. This has helped the company’s remarkable growth in its gross margin, expanding from 38.5% in fiscal 2017 to 43.3% in fiscal 2022. Additionally, Apple generates substantial free cash flow, amounting to a staggering $111 billion in fiscal 2022. This enables the company to return capital to shareholders through share repurchases and a dividend yield of 0.5%. As a long-term holding, there are few companies as compelling as this tech giant.

Amazon (NASDAQ: AMZN): Amazon's recent first-quarter earnings report revealed impressive revenue figures, surpassing expectations and highlighting a compelling investment opportunity. With a commanding 38% share of online retail shopping in the U.S., Amazon remains the dominant force in e-commerce, bolstered by its unparalleled logistics and distribution capabilities. Additionally, Amazon Web Services (AWS), holding a substantial 32% share of the cloud infrastructure industry, continues to benefit from the growing demand for on-demand cloud environments. 

AWS's remarkable operating margin of 28% contributes significantly to Amazon's profitability, setting the stage for future expansion. Furthermore, Amazon's digital ads business witnessed strong growth, recording a 23% increase in sales in the first quarter, solidifying its position as a formidable player in the advertising space. With strategic investments in artificial intelligence, exemplified by the launch of Bedrock within AWS in April, Amazon is well-positioned to leverage emerging technologies. Currently trading at an attractive valuation, with shares down 34% from their 2021 peak, Amazon presents an enticing opportunity for investors seeking a dominant market leader with multiple growth drivers and a focus on AI initiatives.

Meta Platforms (NASDAQ: META): This social media giant has seen its shares soar by nearly 120% in 2023, but the stock is still down 31% from its all-time high. The company exceeded Wall Street's expectations in the first quarter of 2023 and, despite already being a dominant organization, it continues to experience growth, with 3.81 billion monthly active people across its Family of Apps. The opportunity to monetize users outside the U.S. and Canada provides the potential for further revenue growth over time.

Reports suggest that Meta may be developing a decentralized alternative to Twitter. Furthermore, the company is heavily focused on leveraging artificial intelligence to enhance content recommendations, boost monetization, and optimize its data infrastructure. These efforts position Meta well for the upcoming technological shifts. Meta's profitability is also worth noting. Over the past five years, the company has maintained an average operating margin of 36.2%, generating substantial free cash flow amounting to $18.4 billion in 2022. This enabled the management team to repurchase $27.9 billion worth of shares last year. With $37 billion in cash, cash equivalents, and marketable securities on its balance sheet and long-term debt of $10 billion as of March 31, Meta enjoys a solid financial position.

IBM (NYSE: IBM): This tech giant has demonstrated resilience in its sales growth despite a challenging environment, yet its stock has declined by around 10% so far this year. The company’s restructuring efforts, including the divestment of its managed infrastructure services segment and the subsequent creation of three simplified segments—Software, Consulting, and Infrastructure—aim to streamline operations and drive future growth. IBM's constant-currency revenue growth rates have shown improvement this year, indicating a narrowing gap between reported and constant-currency growth rates. 

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One major area of optimism lies in IBM's cloud business, which is leveraging its subsidiary Red Hat to expand its cloud ecosystem. With a hybrid cloud approach that capitalizes on Red Hat's open-source software, IBM is able to benefit from the cloud market's growth without directly competing against dominant platforms like Amazon Web Services and Microsoft Azure. Coupled with its expanding portfolio of AI services, IBM is well-positioned for long-term growth. Furthermore, the company's improving margins and rising cash flows, driven by cost-cutting measures and strategic layoffs, provide ample resources for investments in the hybrid cloud and AI sectors. 

Microsoft (NASDAQ: MSFT): With a market cap of $2.3 trillion, just behind Apple, Microsoft's renowned brands such as Windows, Office, Xbox, and LinkedIn have secured leading market shares across various tech sectors. This dominance has translated into remarkable stock growth, with shares surging over 800% in the past decade. The company's recent foray into artificial intelligence (AI) has only strengthened its investment appeal. Microsoft's early $1 billion investment in OpenAI has proven prescient, as the AI race unfolds, and competitors scramble to enter the burgeoning market. A subsequent $10 billion investment in OpenAI this year has solidified Microsoft's position as a leader. Integrating OpenAI's technologies across its platforms, including Office, Azure, and Bing, Microsoft has established itself as a go-to provider of AI services. Collaborations with Advanced Micro Devices (AMD) in AI chip development further exemplify Microsoft's dedication to the field, ensuring optimal performance and effective AI offerings. 

In addition to AI, Microsoft has made significant strides in the gaming industry. Despite initial challenges competing against industry giants like Sony and Nintendo, Microsoft found success with the introduction of Xbox Game Pass in 2017. The subscription-based service offers access to a vast library of games, attracting millions of subscribers and transforming the Xbox console into a cost-effective option. The platform's popularity has driven Microsoft's acquisition of prominent game studios to enhance its Game Pass offerings. 

Cisco Systems Inc (NASDAQ: CSCO): Cisco Systems is a networking giant that develops, manufactures, and sells networking hardware, telecoms equipment, and other IT services and products. With $23.3 billion in cash and equivalents plus short-term investments, Cisco has the resources for potential acquisitions - an area that could heat up in the second half of 2023. The company is also well-positioned for long-term growth driven by the increasing usage of artificial intelligence software and its focus on shifting towards subscription-based software and services.

Cisco has shown a decent performance in 2023 so far, with a year-to-date rise of around 10%. Although it has lagged behind the broader Nasdaq-100, which saw a 20% increase over the same period, the growth in the company's core networking business and improved supply chain conditions contributed to the positive performance. Cisco has also revised its full-year guidance, anticipating sales growth between 9% and 10.5%, compared to the previous range of 4% to 6%. The company has observed strong new orders, particularly from the commercial and enterprise sectors, with robust demand in the public sector. With a 3% dividend yield, the risk is limited and Cisco is seen by many investors as a strong long-term hold.

Shopify (NYSE: SHOP): Despite experiencing a dip in its stock value in 2022 due to macroeconomic conditions, the company has shown signs of recovery and is poised for brighter days ahead. In the first quarter of 2023, Shopify reported impressive financial figures, with $1.5 billion in revenue and $116 million in monthly recurring revenue (MRR), marking a year-over-year increase of 25% and 10%, respectively. MRR is particularly significant for subscription-based businesses like Shopify as it provides a stable and predictable revenue stream.

The company's strategic decision to streamline its focus on its core e-commerce software offerings should put it in good stead going forward. By refocusing on its software expertise, Shopify will look to enhance its gross profit margin and allocate resources more efficiently. As a software company at its core, Shopify recognizes that its primary value lies in providing top-notch e-commerce solutions rather than attempting to compete in the challenging logistics industry. With a solid track record and a renewed focus on e-commerce software, Shopify has the potential to deliver substantial value to investors in the long run.

Advanced Micro Devices, Inc. (NASDAQ: AMD): AMD presents a compelling case for investors seeking exposure to the semiconductor industry. While Nvidia dominates the industry, AMD could be a less risky investment option while still providing significant upside potential. The company has the potential to continue capturing market share from Intel in the CPU markets for computers and servers while also challenging Nvidia in the artificial intelligence space. 

Another promising aspect of AMD's prospects is its partnership with Microsoft, which is actively purchasing the company's AI-focused MI250 chipset and collaborating on future endeavors. AMD is set to launch its MI300 accelerator processing unit later this year, expected to deliver a significant leap in performance for its data center customers. Similar to Nvidia, AMD is in the early stages of benefiting from AI-driven demand, but it still maintains a considerable discount compared to its previous high. The company's potential for continued market share gains, positive demand catalysts, and partnerships in the AI space positions it favorably for future growth. 

By. James Stafford

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