Governments worldwide have announced ambitious plans to phase out internal combustion powered vehicles over the next couple of decades. As a result, the electric vehicles (EV) industry is witnessing unprecedented private and federal capital investments. For example, president Biden recently signed an executive order to ensure that half of all new vehicles sold in the U.S. are electric by 2030. For this purpose, the government has allocated $7.50 billion from its $1 trillion infrastructure bill to fund the development of EV infrastructure.
However, this investment falls short of the estimated $50 billion needed to reach the production and sales target.
In addition, a global semiconductor chip shortage has harmed the EV industry with increased production costs and supply chain bottlenecks. Given this backdrop, we believe that the shares of fundamentally weak EV companies Enovix Corporation (ENVX), FREYR Battery (FREY), and CBAK Energy Technology, Inc. (CBAT), are best avoided now.
Click here to checkout our Electric Vehicle Industry Report for 2021
Enovix Corporation (ENVX)
ENVX produces and sells Lithium-ion batteries for EVs, Edge Computing, and 5G technology. In addition, the Fremont, Calif.-based concern is in the process of developing and producing 3D cell technology for EVs and energy storage markets. ENVX went public through a reverse merger with special purpose acquisition company Rodgers Silicon Valley Acquisition Corp. on July 15. The company raised $405 million in gross proceeds through this merger and private investments.
On August 10, ENVX announced its manufacturing plans for next-generation 3D Silicon™ Lithium-ion batteries. The company announced that it had signed two agreements with a California-based technology company to produce 45 million batteries a year. However, the production and customer delivery process will not start before 2022.
In its fiscal second quarter, ended June 30, ENVX’s operating loss climbed 164.2% year-over-year to $14.18 million. Its net loss came in at $14.30 million, indicating a 177.7% rise year-over-year, while its net loss per share increased 133.3% from the prior-year quarter to $0.21.
Analysts expect ENVX’s revenue to increase 49.5% year-over-year to $7.85 million in the next year. But it's EPS is expected to remain negative at least until next year.
ENVX has declined 11.6% in price since its stock market debut on July 15 to close yesterday’s trading session at $15.67.
ENVX has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ENVX has a D Value and Momentum grade. In the 85-stock Industrial – Services industry, it is ranked #82.
To see additional POWR Ratings for Growth, Stability, Sentiment, and Quality, click here.
FREYR Battery (FREY)
Based in Luxembourg, FREY designs and sells lithium-ion batteries for EVs, stationary energy storage, marine and aviation solutions in Europe and the world. FREY went public through an SPAC deal with Alussa Energy Acquisition Corp on July 8, 2021.
On July 26, FREY chose Mpac Lambert, a U.K based mass production company, because of an earlier Final Investment Decision (FID) regarding the supply of the casting and assembly equipment package for 24M Technologies Inc.’s (“24M”) SemiSolid lithium-ion battery. However, operations at the company’s Customer Qualification Plant (CQP) do not begin until the latter half of 2022. Therefore, it will be some time before gains can be realized from this development.
FREY’s total operating loss for the second quarter ended June 30 rose 922% year-over-year to $10.22 million. Its total comprehensive loss increased 591.2% from the prior-year quarter to $7.86 million, while its net loss and per share net loss attributable to ordinary shareholders widened 687.8% and 300%, respectively, year-over-year to $8.04 million and $0.04.
The company’s EPS is expected to remain negative until at least next year. In addition, analysts expect FREY’s loss per share to widen 61.5% year-over-year to $0.42.
FREY stock has slumped 6.3% in price since its stock market debut on July 8.
CBAK Energy Technology, Inc. (CBAT)
CBAT is a lithium battery producer based in Dalian, China. Its products have applications in a wide range of EVs, such as electric cars and buses and their hybrid counterparts--electric bicycles and motors--and uninterruptible power supplies and cordless power tools.
On July 26, CBAT announced that it would acquire an 81.6% stake in lithium-ion battery material supplier Zhejiang Meidu Hitrans Lithium Battery Technology Co. by the end of the third quarter of 2021. CBAT hopes to gain a greater share in the high-power lithium battery market by strengthening supply. However, it will be some time before CBAT sees considerable gains out of this venture.
CBAT’s net revenue for the second quarter ended June 30 increased 27.4% year-over-year to $5.89 million. However, its operating loss rose 199.4% from the same period last year to $2.72 million. Furthermore, CBAT’s total operating expenses came in at $3.82 million, indicating a 283.1% increase year-over-year. This can be attributed to a 209.3% year-over-year rise in general and administrative expenses to $2.34 million.
The stock has declined 47.2% in price over the last six months and 35.4% year-to-date.
CBAT’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. In addition, CBAT has an F Stability grade and a Growth, Value, and Quality grade of D. In the 91-stock Industrial – Equipment industry, it is ranked #83.
To see additional POWR Ratings for Momentum and Sentiment for CBAT, click here.
Click here to checkout our Electric Vehicle Industry Report for 2021
ENVX shares were trading at $15.63 per share on Monday afternoon, down $0.04 (-0.26%). Year-to-date, ENVX has gained 24.54%, versus a 21.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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