Clean tech companies are girding for a tempestuous ride ahead of fourth-quarter earnings. Tepid demand and liquidity concerns have cast a shadow over the sector, prompting JPMorgan’s analysts to anticipate a defensive posture.
Lagging Performance with a Silver Lining
Clean tech stocks have largely lagged behind the broader market in the past year. A notable exception has been Enovix Corp (ENVX). JPMorgan’s bullish outlook hinges on Enovix’s potential for robust revenue growth in consumer electronics and the electric vehicle (EV) market. The analysts have set a target price of $18 for the stock, reflecting a potential upside of over 50% from its current levels, around $11.85 per share.
Clean Tech’s Stalled Momentum
The clean tech sector, particularly areas such as EV charging with companies like ChargePoint Holdings Inc (CHPT), EVgo Inc (EVGO), and hydrogen-focused Plug Power Inc (PLUG), has experienced pronounced underperformance. “We expect clean tech companies to proceed cautiously, with a number likely to have faced challenges in the fourth quarter,” remarked JPMorgan analyst Bill Peterson.
- For instance, skepticism and controversy have clouded recent developments, leading to investors adopting a more guarded approach. Short interest across the sector has soared to over 20%, indicating a conservative stance and mirroring the prevailing sentiment around the EV value chain.
Peterson anticipates that clean tech firms will continue to place emphasis on cost-saving measures and capex reduction throughout 2024, given the uncertain demand influenced by macroeconomic factors.
Enovix – A Beacon of Hope
Despite the sector-wide trepidation, Enovix stands out as a potential bright spot. JPMorgan believes that Enovix, rated “Overweight” by the firm, is well-positioned relative to its peers. The optimism is underpinned by several positive factors, including the completion of Factory Acceptance Testing and Site Acceptance Testing, signaling the commencement of high-volume manufacturing at Fab-2.
JPMorgan expects Enovix to report modest single-digit millions in revenue for Q4 2023, buoyed by contributions from acquired Routejade and ongoing shipments to the U.S. Army. The completion of testing milestones and the strategic deferral of spending away from Fab-1 in California are viewed as favorable developments.
Emphasizing Enovix’s commitment to curbing cash burn while nurturing business opportunities, Peterson projects approximately $20 million in revenue for the full year of 2024. The firm’s transition to Fab-2 is a long-awaited event, with JPMorgan anticipating positive outcomes, including sample production in the first half of 2024 and high-volume production in the latter half.
As the clean tech companies prepare for a rugged Q4, Enovix’s strategic maneuvers and upcoming milestones position it as a potential bright spot, according to JPMorgan’s analysis.
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