ENVX Stock: Analysts Forecast 994% Gains

Introduction

Enovix [ENVX] is a battery company that specializes in the production of silicon lithium-ion batteries. Its products are used in wearables, smartphones, laptops and tablets, electric vehicles, and in industrial and medical settings.

Enovix is early on its growth trajectory, but analysts have lofty expectations for its revenue and share price over the next 12 months. This analysis will explore the recent news around ENVX stock and examine its fundamental valuations and forward projections in comparison with two of its key competitors. 

Enovix Seals Smartphone Agreement 

On October 29, Enovix announced that it has reached an agreement with a leading smartphone original equipment manufacturer (OEM) to develop a 100% active silicon anode battery, which will be custom-designed for “specific smartphone models”. It has a target launch date of Q4 2025. 

While the OEM was not named in the announcement, Enovix disclosed that it has top-five market share in China, which is the world’s largest smartphone market.

Enovix’s CEO Raj Talluri said that the company is “thrilled to formalize this relationship, and we see it as a proof point of smartphones needing batteries with much higher energy density and capacity to satisfy the needs of artificial intelligence-enabled apps”.

Enovix Stock Swings on Earnings and Share Issuance

Enovix’s share price, however, was not boosted by the news. Indeed, ENVX stock fell 6.84% on the day it was announced. 

This did, however, coincide with the release of the company’s Q3 2024 results. This release, after markets closed on October 29, saw smaller than expected losses for the company, and a narrow revenue beat. 

Enovix opened October 30 up 9.13% on the previous close, but lost these gains over the following session on news that it was issuing $100m worth of new shares.

In all, Enovix stock has fallen 27.00% in the year to date, and is down 13.69% over the past 12 months. Many will be wondering if the investment case for Enovix is sound, or if this pre-profit business is facing too many risk factors.

Key Fundamentals and Financial Health

There are two stocks that investors might consider as alternatives to Enovix: Amprius Technologies [AMPX] and Eos Energy Enterprises [EOSE].

Amprius, like Enovix, develops lithium-ion batteries, though it primarily focuses on mobility uses such as drones and high-altitude pseudo-satellites. Eos produces zinc-based batteries — a potential rival technology to lithium-ion batteries — that are mainly targeted at grid management use cases.

Source: Yahoo Finance

The most immediate takeaway from this comparison is the rapid sales growth that analysts are forecasting for all three stocks: both Enovix and Eos are expected to post triple-digit growth this year, while Amprius and Eos are expected to do so next year.

Indeed, Amprius is expected to more than quadruple its revenue next year, making the double-digit growth that analysts project for Enovix appear sluggish by comparison. This also highlights the stock’s high P/S ratio. It is not unusual for a pre-profit growth stock to have a high P/S ratio — analysts are, after all, anticipating rapid sales for all three stocks — but in this instance, Enovix stock is priced especially high relative to sales when compared to similar stocks.

Might there be other reasons, though, for investors to consider putting their money into Enovix stock?

ENVX Stock: The Investment Case

The Bull Case for Enovix

Oppenheimer maintained a positive outlook on Enovix stock following its earnings release, reiterating an ‘outperform’ rating and setting a $36.00 price target, implying 293.87% gains from the November 5 close. The firm underscored the significance of Enovix’s capacity ramp-up: Q3 2024 saw the formal opening of Enovix’s Fab2 plant in Malaysia, and EX-1M cells started shipping.

Analysts in general are highly positive about Enovix’s prospects. Among analysts polled by LSEG, the lowest target — $10.00 — suggests that the stock will gain 9.4% over the next 12 months. A median target of $20.00 implies 118.8% gains, while the high target of $100 suggests the stock could gain as much as 994.1% in the next year. 

The Bear Case for Enovix

As the movements around its earnings release demonstrate, there is a lot of volatility in the price of ENVX stock. This is unsurprising given that it is a pre-revenue company, and its high P/S multiple shows that investors have baked in expectations of rapid revenue growth. 

Though narrowing, Enovix still posted gross losses during Q3 — i.e., it spent more in making the products it sold (before costs such as sales, research and impairment are even factored in) than it made in revenue from them.

Stocks like this can lose value quickly if they disappoint. 

Investors were clearly unimpressed with the company’s surprise decision to dilute its stock in order to raise capital, which more than canceled out its post-earnings gains. While the Malaysian plant that the capital is expected to fund could turn out to be a driver of future success, it is already years behind schedule, and will need to continue to ramp up quickly in order to reverse Enovix’s elevated cash burn.

Conclusion

Analysts are forecasting rapid gains for Enovix, but investors need to remain aware that these forecasts are not guaranteed to transpire. Given its pre-profitability stage, there are numerous risk factors for Enovix stock, and investors should consider these carefully and conduct thorough independent research before taking any investment decision.

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