Subsidy Cuts Will Strain EV Demand Yet Resilience Will Emerge

Key Takeaways

• Revenue growth opportunities from EV adoption and renewables are tempered by risks from reduced subsidies, shifting technologies, and regional policy changes.
  
• Margin and profitability gains face headwinds from high R&D costs, supply chain pressures, and limited geographic diversification.
  
• Exposure to regulatory risks, demand volatility, margin pressures, high debt, and intense competition may hinder Wallbox's financial stability and long-term growth prospects.

Catalysts

A technology company, designs, manufactures, and distributes charging solutions for residential, business, and public applications in Europe, the Middle East, Asia, North America, and the Asia Pacific.

• While global electric vehicle adoption and supportive government incentives could expand Wallbox's addressable market and drive revenue growth, the company faces ongoing uncertainty from potential reductions in subsidies-such as the anticipated loss of key North American tax credits-which risks slowing market expansion and weakening top-line growth.
  
• Although the accelerating transition to renewable energy and increasing demand for grid-flexible solutions positions Wallbox to benefit from innovative products like the Quasar 2 and virtual power plant services, future revenue visibility is clouded by technological shifts toward alternative transportation or energy storage solutions that could dampen demand for traditional EV charging over the longer term.
  
• Despite early traction in higher-margin software and services offerings, including strong year-over-year growth in software revenue, profitability improvements could be held back by the need for ongoing high research and development spending and selective salesforce investments to fuel new growth, potentially delaying consistent improvements in net margins.
  
• While the company's inventory reduction and operational efficiency initiatives have resulted in lower cash costs and improved adjusted EBITDA performance, persistent freight, duty, and tariff expenses-paired with any regional supply chain disruptions from geopolitical or regulatory factors-may constrain future margin expansion.
  
• Even as Wallbox leverages its partnerships to expand in North America and capitalize on growth rebounds in core European markets, overexposure to specific regions and limited diversification beyond these strongholds means future earnings remain vulnerable to local policy changes and fluctuations in EV demand.

Wallbox Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Wallbox compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Wallbox's revenue will grow by 41.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -84.6% today to 1.5% in 3 years time.
• The bearish analysts expect earnings to reach €6.1 million (and earnings per share of €nan) by about August 2028, up from €-125.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 24.9x on those 2028 earnings, up from -0.5x today. This future PE is lower than the current PE for the US Electrical industry at 32.4x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 16.22%, as per the Simply Wall St company report.

Wallbox Future Earnings Per Share Growth

Risks

• Long-term risk exists due to potential regulatory changes and subsidy removal in key markets like the United States, as the phasing out of incentives such as the 30D tax credit could slow EV adoption and reduce revenue for Wallbox in North America.
  
• Despite overall EV market growth in Europe, Wallbox's revenues declined by 22% compared to last year's record quarter and have not uniformly reflected the regional EV market recovery, exposing the company to demand volatility and underperformance, which poses a threat to revenue stabilization and growth.
  
• Margins remain under pressure from increased freight, duty, and tariff costs, along with higher bill of materials expenses, outweighing operational improvements and possibly limiting future gross margin expansion and net margin improvements.
  
• Significant short-term and long-term debt, with €102 million due short-term, constrains financial flexibility and increases vulnerability to high interest rates or broader credit tightening, which could pressure both net earnings and cash flow sustainability.
  
• While strategic product launches (such as Quasar 2) and partnerships position Wallbox for innovation, slow ramp-up in new product deployment and potential competition from major automakers offering integrated charging solutions threaten Wallbox's ability to capture market share and drive long-term revenue and earnings growth.

Valuation

• The assumed bearish price target for Wallbox is $5.98, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Wallbox's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $9.0, and the most bearish reporting a price target of just $5.98.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €416.5 million, earnings will come to €6.1 million, and it would be trading on a PE ratio of 24.9x, assuming you use a discount rate of 16.2%.
• Given the current share price of $4.36, the bearish analyst price target of $5.98 is 27.1% 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.