I Believe Global Expansion And Efficiency Will Build Future Promise

Key Takeaways

• Geographic expansion and new business models stabilize revenue by reducing U.S. government dependency and introducing stable streams like sponsorship programs.
  
• Cost reductions and product diversification are expected to improve margins and capture broader customer demand, boosting sales and earnings.
  
• Beam Global's dependency on U.S. federal sales and rising costs challenge profitability amid economic pressures and reduced liquidity.

Catalysts

A clean-technology innovation company, engages in the design, development, engineering, manufacture, and sale of renewably energized infrastructure products and battery solutions in the United States and Romania.

• The company's geographic expansion into Europe, the Middle East, and Africa has opened up new markets, reducing dependency on U.S. federal government sales and potentially increasing revenue streams from international customers. This expansion could significantly boost revenue and earnings.
  
• Cost reductions through engineering design changes and operational efficiencies, especially through the integration of European operations in Serbia, are expected to enhance gross margins. These improvements in cost structure can positively impact net margins and earnings.
  
• Diversification of the product portfolio, including new products like BeamBike, BeamPatrol, and BeamWell, aims to capture broader customer demand across various sectors, potentially increasing sales and revenue.
  
• The introduction of new business models, such as the recurring revenue sponsorship program with VINCI Airports, provides a new stable revenue stream, enhancing overall earnings potential and reducing risk from fluctuations in government sales.
  
• Continued focus on sales force multiplication via agents, resellers, and distributors without significantly increasing operating costs could leverage Beam's sales reach while maintaining controlled operating expenses, boosting net margins and earnings growth.

Beam Global Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Beam Global's revenue will grow by 8.4% annually over the next 3 years.
• Analysts are not forecasting that Beam Global will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Beam Global's profit margin will increase from -22.9% to the average US Electrical industry of 10.5% in 3 years.
• If Beam Global's profit margin were to converge on the industry average, you could expect earnings to reach $6.6 million (and earnings per share of $0.37) by about April 2028, up from $-11.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.8x on those 2028 earnings, up from -2.1x today. This future PE is lower than the current PE for the US Electrical industry at 22.7x.
• Analysts expect the number of shares outstanding to grow by 6.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.75%, as per the Simply Wall St company report.

Beam Global Future Earnings Per Share Growth

Risks

• Beam Global faces challenges due to the new U.S. administration's negative stance on electric vehicles, including ending tax incentives and halting government electric vehicle purchases and installations, potentially impacting federal revenue, which has historically made up over 50% of their total revenue.
  
• Increased tariffs and uncertainties in the global economy introduced by the new administration may raise material costs, such as steel, aluminum, and copper, affecting gross margins and operational efficiency.
  
• The company’s cash balance decreased significantly from $10.4 million in 2023 to $4.6 million in 2024, which constrains its liquidity and could affect its ability to handle unexpected financial challenges or further strategic opportunities without additional financing.
  
• Despite efforts to diversify and expand globally, transitioning from a reliance on U.S. federal government sales to broader international and non-government markets could result in lumpiness in order cadence and revenues, leading to potential inconsistencies in earnings.
  
• The company remains exposed to tariffs and rising domestic costs, as well as potential recessionary impacts, despite mitigation strategies through its Serbian operations and efforts to expand in international markets, posing a risk to its cost structure and future profitability.

Valuation

• The analysts have a consensus price target of $5.5 for Beam Global based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $62.9 million, earnings will come to $6.6 million, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $1.53, the analyst price target of $5.5 is 72.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.