Transport Your Portfolio to the Future With a Twist of Technology

Technology has led to disruptions in a wide variety of industries, none more than autos and transportation. Several leading growth stock experts and contributors to MoneyShow.com, highlights transport-related stocks that have benefited from a high-tech twist -- from electric vehicles, to ride-sharing to online auto sales and even a speculative play on taxi-style helicopters. Jon Markman, Strategic Advantage The dominant investment theme since 2009 has been digital transformation. Currently tech stocks are undergoing simple, modest mean reversion. Tech shares rose too quickly in 2020 as the global pandemic forced enterprises all over the world to digitize their operations quickly. Now tech shares are pulling back a touch in response. There has been a silver lining, though. Many cyclical businesses are leaner. Their operations have been infused with digital goodness. The best are becoming technology companies. Data analytics is now foundational. New products are conceptualized and tested virtually in powerful simulations to reduce costs. Supply chains and inventories have been streamlined with software tools. Communication suites and customer relationship management run seamlessly in the cloud. More importantly, stodgy cyclical companies are being revalued by as tech companies. General Motors is investing $27 billion to move its fleet by 2035 to electric propulsion. Ultium, a modular battery and electric motor platform, will form the foundation of all future cars, crossovers and trucks. Despite the big hit to free cash flow, shares have risen around 40% in 2021. Investors are betting that the Detroit company is beginning a new phase that will support nontraditional service businesses models like ride hailing and vehicle subscriptions. The shares are a bargain, recently trading at only 9.5x forward earnings and 0.7x sales. Based on expected sales growth alone the stock should trade to $115 over the next 18 months, up around 100% from current levels. Ford is on a similar trajectory. Managers announced in February a rapid $29 billion transition to electric vehicles. The new Mach-e, an all-electric Mustang SUV, is winning rave reviews in the industry press. And an electric F-150 is set to hit streets in 2022. Investors are buying into the idea Ford can capture a little of the magic that made Tesla shares a big winner in 2020. Ford shares recently traded at only 8.7x forward earnings and 0.4x sales. As investors look forward to surging EV sales these financial metrics are certain to expand aggressively. I see the stock reaching $39 in 18 months, a significant rise from the current levels. Carl Delfeld, Cabot Global Stocks Explorer You can often find exciting and profitable investment ideas at the edge of new technologies. California-based QuantumScape is working on some breakthrough electric vehicle battery technology backed by some heavyweight industrialists, as well as Volkswagen . Current lithium-ion batteries are heavy, expensive to produce, don't last all that long and take considerable time to recharge. QuantumScape believes they will fairly soon be rendered obsolete by solid-state batteries. Lithium-ion batteries are made up of three layers: a positive cathode and a negative anode, each with an electrical contact, and between them is a porous polymer separator, and the whole cell is flooded by a liquid electrolyte. In a QuantumScape solid-state battery, there is only a cathode connected to an electrical contact through a solid-state ceramic separator. No anodes needed. In layman's terms, this means more energy can be stored in a smaller space, giving QuantumScape's battery greater energy density. Greater density means these batteries can achieve greater range, superior reliability and a longer life than their lithium-ion cousins. In addition, they're also capable of charging to 80% in as little as 15 minutes -- half the time it takes the fastest Tesla Supercharger to charge. The chief asset of QuantumScape is the backing of respected technologists such as co-founder and CEO Jagdeep Singh, who was educated at Berkeley and Stanford University. Next comes QuantumScape's chief technology officer, Dr. Timothy Holme, with degrees in physics and mechanical engineering from Stanford. Tesla co-founder J.B. Straubel and venture capitalist John Doerr are on the board as well. Doerr is famous for backing Google in 1999. Bill Gates is also a prominent investor and is keenly interested in battery tech. The next positive is the company's near decade long partnership with Volkswagen. And in 2020, Volkswagen invested $300 million in QuantumScape, securing 20% equity ownership of the company. When Volkswagen's QuantumScape batteries go operational, Volkswagen and its brands such as Audi, Porsche and Bentley could offer cars with 450- to 500-mile range batteries. This partnership could vault Volkswagen to the front of the pack of EV players. Angelo Zino, CFRA Research's The Outlook Uber Technologies carries our highest investment ranking of 5-STARS, or Strong Buy; this opinion reflects our view of growth prospects ahead. Ridesharing services, currently in early phases, will witness significant growth potential over the next 20-30 years, by our analysis. The ride-hailing space has been among the fastest-growing mobility services over the last decade, creating a new mode of transportation (defined as Transportation-as-a-Service or TaaS), disrupting the taxi and rental car industries. We like prospects within Eats, given a rising installed base and, opportunities to improve the take pay; additionally, we forecast industry consolidation benefiting UBER. In February, UBER announced its intent to acquire Drizly, the leading provider of on-demand alcohol delivery in the U.S., for $1.1 billion in stock and cash (over 90% stock). The deal is seen closing by midyear and Drizly will become a subsidiary of UBER, eventually being integrated with the Uber Eats app. We positively view the Drizly announcement, as it instills another growth opportunity to the Uber Eats business at a minimal expense. While Drizly increased bookings by more than 300% last year, we forecast even more growth opportunities, benefiting from UBER's large installed base of customers. In December, UBER acquired on-demand food delivery competitor Postmates, which brings more than 10 million active customers, with geographic strength in the Southwest; we also like Postmates' subscription-based program. Our 12-month target price of $75 is based on discounted cash flow analysis. We apply a weighted average cost of capital of about 8.5%, a beta of 1.1, and a terminal growth value of 3%. Potential upside from other bets and more stable spending on autonomy/strategic investments will likely bode well for profits and cash flow as we see scale benefits for UBER. Doug Gerlach, Investor Advisory Service Selling new and used vehicles online has been evolving over many years. CarGurus, Inc. was founded in 2005 by Langley Steinert, also a cofounder of TripAdvisor . The company started as an automotive blog where consumers could post information about local dealers, repair shops, and auto-related information. The site now has a wide variety of information for those researching, purchasing, or selling a vehicle, including test drive information, new and used vehicle listings, and financing. For the most popular use of the site, consumers considering the purchase of used vehicles, the company applies a proprietary algorithm to each vehicle to generate a Deal Rating, one of: Great Deal, Good Deal, Fair Deal, High Priced, or Overpriced. To support long-term growth CarGurus is targeting additional digital retail capabilities and has expanded into the dealer wholesale auction market, defined as dealers selling inventory to other dealers. For digital retail, the company has introduced Area Boost, a product that allows dealers to market vehicles to consumers without a showroom visit. Another recently introduced offering, RouteOne, allows the customer to negotiate and complete the sale remotely, including financing, warranties, and after-market product add-ons. With the purchase already completed, the customer simply picks up the vehicle at a specified time. In January, CarGurus purchased a 51% stake in CarOffer, a Texas-based private company with an online wholesale auction website that allows dealers to inspect, bid and transport used vehicles. Since its launch in 2019, CarOffer has grown rapidly, with 2,000 dealers processing $350 million in merchandise and service transactions during the third quarter of 2020. Analysts are projecting CarGurus can grow earnings 21% per year. Five years of this growth and our selected high P/E of 35 could generate a stock price as high as 61. We use a low price of 14, the product of calendar year 2020 EPS of $0.68 and the average low P/E of 21. The upside/downside ratio is 3.5 to 1. Adam Johnson, Bullseye Brief After ten years of privately funded development, electric-powered flight capable of lifting several thousand pounds is now a reality. The FAA has issued its first-ever certification for an e-copter, and it's already being used by the Air Force to transport personnel more efficiently across sprawling airbases. The company making it possible wants to introduce a service prices similar to Uber over the next several years, but its corporate SPAC parent already trades today. I want to be clear: This is big picture, high risk and long term; but the numbers do make sense. It's a great example of American Ingenuity and I'm a buyer. Reinvent Technology Partners is a SPAC created by LinkedIn co-founder Reed Hoffman and Zynga founder Mark Pincus. On February 24, it announced a $6.6 billion transaction to acquire Joby Aviation, the world's first Electric Vertical Takeoff and Landing (eVTOL) manufacturer to receive FAA certification and US Air Force airworthiness. The company aims to launch commercial service by 2024, operating short-haul flights priced similarly to UberX... with the energy efficiency of a Tesla... while cutting travel time by 75% for the typical 25 mile trip. Joby will build and operate its own fleet, initially ferrying travelers between airports and large urban centers like Los Angeles and New York. Joby engineers will design and manufacture the vehicles, while Joby pilots will operate them, and Joby personnel will manage people moving through Joby-owned transportation hubs. The approach is monumental in scope, and explains why dozens of mechanical engineers from Toyota have joined dozens of electrical engineers from Intel to build the necessary infrastructure. Joby bought Uber Elevate last year (Uber's homegrown helicopter service), and several dozen software engineers are bringing their operational experience as well. Each of these partners is an also an investor, JetBlue included. Curiously, Uber intends to integrate Joby into its app. The RTP acquisition of Joby provides an infusion of capital which will give Joby total cash on-hand of $2.1 billion, enough to fund development an an initial fleet of 40 vehicles ferrying Bay Area passengers to SFO and/or Los Angeles travelers to LAX. Joby projects 963 eVTOLs will generate $2B in revenue by 2026, the first year it should be judged as viable. Granted, these are all Joby's numbers, but we have to start somewhere. RTP founders Reed Hoffman and Mark Pincus are fully committed. Their respective lock-ups in this transaction (the amount of time which must pass before they can sell their shares) is five years... many magnitudes longer than the standard six-month holding period. Additionally, they have stock options that don't even vest unless the stock appreciates to $40-50. In other words, they are playing for a moonshot and their interests are aligned with ours. RTP's acquisition of Joby will result in a one-for-one stock exchange, where each RTP share will convert into one Joby share, and the transaction is expected to close April-May. No analysts cover Joby currently, but I suspect this will change after the closing.

Transport Your Portfolio to the Future With a Twist of Technology

These transportation-related picks include EVs, new developments in battery technology, online auto sales, ride-sharing and an Uber-type helicopter service.

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