December 3, 2022

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3 Stocks Set to Profit From Booming Infrastructure Investment

President Biden’s Infrastructure Investment and Jobs Act was officially signed into law this week, adding billions of dollars in fuel to the growth of America’s renewable energy economy. For some companies operating in this nascent market, that surge of funding could be just the support they need to take their products mainstream. 

We asked three of our Foolish contributors to pick a stock that they think will make particular headway thanks to this infusion of renewable energy money. Their choices — all leaders in specific green energy niches — were Bloom Energy (NYSE:BE), Proterra (NASDAQ:PTRA), and ChargePoint Holdings (NYSE:CHPT). Here’s why they think these companies are well-positioned to be beneficiaries of the boom in green energy investment. 

Image source: Getty Images.

The hydrogen energy play

Travis Hoium (Bloom Energy): Today, most energy storage is accomplished using lithium-ion batteries, but they have limitations. Large storage batteries are great solutions for a home, where you may need them to provide backup power for a few hours, or for a business so that it can keep operating even if there’s a short-term outage. However, they’re not as viable a solution for long-duration storage, like storing solar energy generated in the summer for use in winter months. That’s where hydrogen can come in. 

Companies like Bloom Energy are building a hydrogen economy that consists mainly of electrolyzers — devices that turn electricity and water into hydrogen — and fuel cells, which use that hydrogen to generate electricity. Done right, this could be an entirely clean process, creating a non-carbon-emitting fuel that could be stored easily and transported for use in everything from buildings to container ships. But the industry is extremely young, so there’s a lot of risk. 

The infrastructure package could help the hydrogen economy in a number of ways. The act earmarks $14 billion for resiliency programs and includes another $11 billion grant program for states, utilities, and other organizations to make resilience investments.

It also puts $3 billion worth of investment into “grid flexibility” and another $3 billion will go toward helping energy storage companies build out their manufacturing operations. 

What’s clear is that the government is pushing investments in energy storage and clean energy technologies, and hydrogen is likely going to be one of the beneficiaries. It provides a valuable solution, its costs are coming down, and manufacturing facilities are being built in the U.S. So Bloom Energy could get a big boost from new government spending in the coming years. 

A boost for buses and beyond

Howard Smith (Proterra): Commercial electric vehicle (EV) technology company Proterra has already been growing its business as the electrification of transportation moves forward. But it now has a new catalyst — the federal infrastructure act, which allocates billions of dollars in funding to accelerate the country’s transition from internal combustion vehicles to electric vehicles.

Proterra, which makes electric transit vehicles, drivetrains, and battery platforms, just reported its third-quarter financial results last week, and its revenue grew 30% year over year. In addition, its battery production almost doubled and its powered battery deliveries grew by 144% due to a 58% rise in transit bus deliveries. 

blue Proterra battery electric bus.

Image source: Proterra.

Biden’s $1 trillion Infrastructure Investment and Jobs Act includes two line items particularly aligned with Proterra’s business. The bill contains $5 billion for zero- and low-emission buses and other transit vehicles that will replace much of the nation’s school bus fleet. And another $7.5 billion is geared toward building out EV charging infrastructure in the U.S. 

Unlike many other newly public EV names, Proterra is not a pre-revenue start-up with plans but no products. Its guidance calls for revenue of nearly $250 million in 2021. It has already delivered more than 750 electric transit buses, and has more than 55 megawatts of charging infrastructure installed for its fleet customers. 

While there will most certainly be bumps along the way, the transition to electric vehicles in the U.S. looks like it will include much more than just consumer vehicles. Proterra is in a good position to benefit not only from vehicle sales, but also from rising demand for its battery and energy platform solutions.

The stock has jumped almost 25% in the last month, boosted by investors’ optimism about how the infrastructure act will benefit the company. Along those lines, Proterra management said in its latest financial update that the act will continue to “provide additional tailwinds to the growth outlook for each of our businesses in 2022 and beyond.” Investors who want to profit from the coming growth of the EV sector may not want to miss this bus.

ChargePoint plays a pivotal role in the growing electric vehicle industry

Daniel Foelber (ChargePoint Holdings): Although it took Congress months to hammer out the bipartisan infrastructure act, the resulting legislation is still a big win for electric vehicle charging companies. About $7.5 billion of the roughly $1 trillion bill is earmarked toward expanding EV charging infrastructure in the U.S. ChargePoint operates one of the largest Level 2 charging networks, and it has been hard at work expanding its fast-charging capabilities. It stands to benefit from the government’s investment in infrastructure, but arguably, an even bigger catalyst will be the rapid rise of EVs.

In addition to Tesla, newer companies such as Rivian, Lucid Group, Nio, and others are hitting the scene with impressive technology. Unlike Tesla, which out of necessity built its own charging network, many of these newer players will depend on third-party charging providers like ChargePoint. In addition, most legacy automakers like Ford and General Motors are increasing their EV spending.

ChargePoint’s growth is driven by the level of demand for charging options adjacent to businesses and commercial and recreational areas. The COVID-19 pandemic stunted the company’s growth because businesses lost foot traffic, and therefore felt less of a need to attract customers with charging stations. With the economy reopening and businesses recovering, ChargePoint, too, is seeing its numbers improve. It will take time for the company to become profitable, especially as it continues to spend heavily in an effort to retain its market-leading position. However, the company’s fiscal 2022 Q2 results showed that it has turned the corner and is ready to resume the growth trajectory it was on prior to the pandemic. 

Adding fuel to the energy transition

Each of these companies already had strong market trends behind them. EV sales are rising, and companies and governments are investing more in hydrogen assets. But the billions of federal dollars earmarked to support their technologies could accelerate these companies along their growth paths. That’s why we think Bloom Energy, Proterra, and ChargePoint could be among the biggest winners from the Infrastructure Investment and Jobs Act. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


https://www.fool.com/investing/2021/11/20/3-stocks-set-to-profit-from-booming-infrastructure/