REE Automotive is a buy, Roth says

Its first quarter results are in the book and Roth MKM analyst Craig Irwin still thinks there is money to be made on REE Automotive (REE Automotive Stock Quote, Chart, News, Analysts, Financials NASDAQ:REE).

On May 30, REE posted its Q1, 2024 results, showing a GAAP Net Loss of $25.2-million, down 12% year-over-year.

“We started 2024 with strong momentum and catalytic milestones, from achieving U.S. certification to starting to deliver trucks against our order book as part of our demo program with our dealers across North America,” CEO Daniel Barel said. “These demos are used by dealers to generate orders from their fleet customers, potentially further growing our order book value, which recently crossed $50 million. As our dealer network is now sufficiently built to properly cover North America, we are pivoting to focus on adding fleet orders to our order book and to serve some of the largest fleet companies in the world, including Penske Truck Leasing (“Penske”) and U-Haul International, Inc. (“U-Haul”). We are excited to partner with Penske and have them offer our electric trucks to their customers and we are proud to be the first electrification partner for U-Haul which we believe both demonstrates our leadership in the industry and the value our technology delivers.”

The analyst detailed the company’s recent progress.

“REE has now delivered trucks to five named partners including U-Haul, Pritchard, Penske, Airbus, and Tom’s Trucks,” he noted. “At last week’s ACT Expo, REE hosted over 120 potential customers for test drives, and was the second most active in vehicle demonstrations behind Tesla (TSLA-Neutral). 1Q24 adj EBITDA modestly above our model shows mgmt is controlling spending well, and the team gave guidance for frictional costs of $4m-$5m per month, versus the prior guide for $6m a month. We will watch for orders and deliveries as primary catalysts.”

In a research update to clients May 31, Irwin maintained his “Buy” rating and price target of $14.00 on REE.

The analyst thinks the company will post an EBITDA of loss of $79.9-million on revenue of $7.5-million in fiscal 2024. He expects those numbers will improve to an EBITDA loss of $60.0-million on a topline of $175.0-million in fiscal 2025.

“We reiterate our $14 target using a 1.0x multiple on our ’25 revenue estimate of $175m. We use a 1.0x P/sales multiple to balance the technology potential with near-term risks, where orders and deliveries to major customers likely serve as valuation catalysts,” he added.