Enovix (ENVX), a next-generation battery technology company, recently saw its shares drop on news of CFO Farhan Ahmad’s departure. The company subsequently announced the search for a replacement with an “exceptional record in investor relations” suggesting dissatisfaction with communication around the company’s recent $100M equity raise, which led to analyst downgrades. Despite these issues, Enovix reports positive progress in Q3, with new operational facilities, partnership commitments from a major smartphone OEM, and advances on product roadmaps for EX-2M and beyond.
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Enovix Is Making Substantial Strides
Enovix is a technology company that creates high-energy-density, safety-focused batteries to power future tech, such as IoT and mobile devices. The company’s strategic focus lies in larger, high-value sectors, like smartphones and AR/VR headsets, which require higher energy-dense batteries. The recent rise in AI-enabled phones has validated this strategy, creating increased demand for its products. Traditional batteries fail to meet the growing energy demands of modern AI-driven devices, and Enovix is capitalizing on this by developing a new generation of energy-dense batteries.
The company is moving towards the mass production of EX-1M in 2025, a product demonstrating a breakthrough in active silicon technology. In addition, Enovix is set to provide select customers with samples of EX-2M in Q4 and has also made strides on EX-3M.
What else Is on the Cards for Enovix?
Enovix opened a new “Fab2” manufacturing facility in Malaysia, which has received positive responses from major smartphone Original Equipment Manufacturers (OEMs) for its quality and speed. The Agility Line is fully functional, and the company started shipping EX-1M cells to customers in Q3 and is on track to complete the High-Volume Line’s Site Acceptance Testing (SAT) in Q4 2024.
The company has made substantial strides toward profitability by securing demand across several high-growth markets, including formalizing a strategic partnership with a second-leading smartphone OEM, with the prospect of entering the smartphone market in late 2025, supported by high-volume production from the Fab2 facility. Further, Enovix has also confirmed a production schedule with a leading Internet of Things (IoT) customer for a mass production purchase order in 2025. Finally, the firm is developing customized Electric Vehicles (EV) products with two of the world’s largest automotive OEMs.
Working Toward Profitability
In the third quarter of 2024, Enovix reported revenue of $4.3 million, beating analyst estimates and marking an increase from the $3.8 million revenue reported in the second quarter of 2024. Gross income remained relatively similar to previous levels, mainly due to a slight sequential reduction in GAAP cost of revenue, which amounted to $5.0 million.
GAAP operating expenses declined to $48.6 million, down from $88.1 million, primarily due to a notable decrease in restructuring costs as manufacturing operations were moved from the U.S. to Malaysia. Non-GAAP operating expenses declined, down 12% from the second quarter to $27.2 million. Meanwhile, the GAAP net loss was $22.5 million, a significant decrease from the $115.9 million loss reported in the second quarter, primarily due to lower restructuring costs and a $29.9 million income from a decrease in the fair value of the company’s common stock warrants.
Adjusted EBITDA showed a loss of $21.6 million, while earnings per share losses were $0.30 on a GAAP basis and $0.17 on a non-GAAP basis, compared to the second quarter’s losses of $0.67 and $0.14, respectively.
As of the quarter’s end, the company reported $200.9 million of cash, cash equivalents, and short-term investments.
Management provided guidance for Q4 2024, projecting revenue from $8.0 million to $10.0 million. The projected adjusted EBITDA loss is between $19.0 million and $25.0 million, with a GAAP EPS loss between $0.23 and $0.29 and a non-GAAP EPS loss ranging from $0.15 to $0.21.
Analysts Are Mostly Bullish on the Stock
The stock has been highly volatile (beta of 3.04) as it has bounced around. The most recent downturn has the stock down 30% year-to-date. It trades near the lower end of its 52-week price range of $5.70 – $18.68 and shows ongoing negative price momentum as it trades below the major moving averages.
Analysts following the company have mostly been bullish on ENVX stock. For instance, JPMorgan’s (JPM) Bill Peterson recently reiterated an Overweight rating on the shares despite the departure of the CFO, stirring uncertainty concerning the management structure. He noted positive developments, such as completing site acceptance testing for the high-volume line at Fab-2 and additional customer milestones targeted by 2025.
Enovix is rated a Strong Buy overall, based on the recent recommendations of nine analysts. Their average price target for ENVX stock is $22.00, representing a potential 154.34% upside from current levels.
Final Thoughts on ENVX
Despite recent challenges, including the departure of its CFO, Enovix has shown positive Q3 progress. The company has successfully launched operational facilities, secured partnership commitments from a leading smartphone manufacturer, and made significant advancements in product development. A lucrative partnership with a second-leading smartphone OEM and a confirmed production schedule with a leading IoT customer suggest Enovix is well-positioned to capitalize on opportunities in high-growth markets. With projections of upside growth pointing to a trend toward profitability, ENVX is a stock investors may want to watch.
