Enovix (NASDAQ:ENVX) has made potentially impressive strides in silicon-anode lithium-ion battery technology. Thriving industry demand and promising technological advancements make for a potent mix, and analysts are bullish on the potential for significant growth. Despite the 17% drop in the stock over the past year, it is still relatively rich in valuation. ENVX is a speculative growth play that offers significant upside potential.
New Battery Technology
Enovix is expanding its manufacturing capabilities of silicon-anode lithium-ion batteries by utilizing proprietary 3D cell technology to enhance energy density and longevity. In the fourth quarter of 2023, Enovix completed the acquisition of Routejade, enabling high-volume manufacturing capacity in Malaysia.
The demand for high-energy-density batteries is reaching a crucial point, especially within the smartphone industry. With the surge in power-intensive AI applications, the strain on device batteries will soon reach unprecedented levels. Enovix envisions its unique battery structure can offer a 50% increase in capacity compared to existing market offerings.
Financial Results and Outlook
Enovix recently announced earnings for Q4 2023. Earnings per share of -$0.28, outperformed the expected -$0.29. The company also reported revenue of $7.38 million, up from $0.2 million in the third quarter and surpassing expectations of $3.37 million.
The company expects Q1 2024 revenue in the range of $3.5 million to $4.5 million, with an adjusted EBITDA loss projected to be between $24 million and $31 million and a non-GAAP EPS of -$0.29 to -$0.35.
The company is focused on executing a strategy for the year geared towards a global scale-up, emphasizing two significant milestones: achieving high-volume production using Gen2 equipment and introducing a high-energy density battery specifically designed for the smartphone industry, ready for demonstration by Q2 2024. Successfully hitting these targets will be critically important for revenue growth moving forward.
Where the Stock Stands Now
ENVX stock has declined 17% in the last year. At $9, ENVX is trading toward the bottom of its 52-week range of $8.33-$23.90. It continues to show negative price momentum, trading below its 20-day (9.95) and 50-day (10.52) moving averages.
Despite the price drop, the stock trades at a rich valuation on relative metrics. Given its lack of revenue thus far, Price-to-Book is an appropriate metric to use for comparative valuation. The PB ratio of 5.9x sits above the Industrials sector and Electrical Equipment and Parts industry averages of 2.8x and 3.2x, respectively.
Short interest on the stock has steadily risen over the past year and sits at around 20% of shares outstanding. This could fuel the fire if management hits its targets and announces successful progress toward growing revenues, as a rising share price would squeeze short sellers into closing their positions by buying shares, further driving the price.
Is ENVX a Good Stock to Buy?
Analysts covering ENVX stock have been bullish. For instance, Canaccord Genuity analyst George Gianarikas recently reiterated a Buy rating and set a price target of $17, citing a positive outlook on Enovix’s battery technology as a substantial improvement in powering the next generation of AI-enabled smartphones.
Enovix stock currently grades out as a Strong Buy based on an aggregation of nine analysts’ stock ratings in the past three months, of which eight are Buys. The average ENVX stock price target of $31.38 represents an upside potential of 248.67% from current levels.
The Big Picture
Enovix is making significant progress in silicon-anode lithium-ion battery technology. Much depends on the company’s ability to meet its ambitious milestones set for 2024, which could significantly propel the stock price. It is a highly speculative endeavor, predicated on the company’s ability to execute and the technology’s ability to deliver (no sure thing on either count). However, investors in ENVX stock could reap a significant upside if the promise of this innovative technology is fully realized.
