Enovix Corp (NASDAQ: ENVX) has seen its share price plummet by more than 40% after its latest earnings update left investors disappointed.
Negligible revenue and a widening loss appears to have spooked some backers, but the battery maker says it spent the quarter improving strategic relationships, shipping free samples and improving manufacturing capabilities.
With lithium-ion batteries potentially an exciting opportunity, it’s well worth examining if ENVX stock is a good investment.
What Does Enovix Do?
Enovix Corporation designs, develops, and manufactures lithium-ion batteries. The company says its proprietary 3D cell architecture increases energy density and maintains high cycle life.
Enovix is building an advanced silicon-anode lithium-ion battery production facility in the US for volume production. The company's initial goal is to provide designers of category-leading mobile devices with a high-energy battery so they can create more innovative and effective portable products.
The business is also developing its 3D cell technology and production process for the electric vehicle and energy storage markets to help enable widespread utilization of renewable energy.
The company was founded in 2007 and is headquartered in Fremont, California.
ENVX Stock Financials
Revenue for the period came in at just $8,000, a disappointing result when considering that the business made sales of $5.1m in the first half of its financial year. The company stated that the majority of batteries shipped during the quarter were samples that did not generate revenue.
The business says it still expects to achieve revenue of between $6m and $8m across its full year.
With cost of sales from the period coming in at $6.6m and operating expenses amounting to $27.1m, Enovix booked an operational loss of $33.7m.
The business had cash and cash equivalents of $349m at the end of the period. Enovix does not distribute a dividend to its shareholders.
ENXV stock has fallen by more than 61% across the year to date and by 65% over the last 12 months. During this period it hit highs of $39.48 and lows of $7.26. Currently, the share price is at $10.53.
ENVX Growth Potential
The fact that the company’s technology can be applied to a broad range of products beyond the EV market is a factor in Enovix’s favour. At the moment, the business is focussed on producing cells for wearable, mobile and computing applications.
It received its first commercial order earlier this year from an unnamed customer which had tested Enovix’s batteries for a year. Another customer focused on small wearable tech has since signed up.
Additionally, the business says it has strengthened relationships with megacap technology companies with multiple portable electronics product applications. Further afield, Enovix says it has active engagements across Asia, including with leading smartphone OEMs in China and major consumer brands in Japan and Korea, including Samsung.
The business says it had a revenue funnel at the end of the third quarter of $1.4bn, consisting of $1.0bn of engaged opportunities and $423m of active designs and design wins.
The size of the company’s opportunity looks to be growing too, with ResearchandMarkets reporting that the value of the mobile computing battery market is expected to expand from $8.3bn to $15.2bn between 2021 and 2027. It’s also worth noting that the company is building battery technology for the EV market, another rapidly growing segment.
ENVX Investment Risks
The major concern with Enovix is money and whether the business has the chops to become profitable. At the moment, the company’s operational costs are growing at a far faster rate than revenues, having almost doubled across the year to date compared to the same period in 2021.
That being said, the company has a significant cushion from the almost $350m of cash and cash equivalents it had at the end of its third quarter. However, if costs continue to accelerate this buffer could be eaten away quickly, leading to the company seeking further funding or encountering financial difficulties.
Is ENVX Stock a Good Investment?
Enovix may have reported a wider than expected loss, but that appears to gloss over the business’ potential. It only reported its first commercial revenues earlier this year and the size of the opportunity on hand is potentially enormous if Enovix can gain a significant foothold in what is a competitive space.
Even so, investing at any business at such an early stage is inherently risky. Revenue acceleration must happen soon for Enovix if the business is to keep up with rapidly increasing operational costs.
The nine analysts covered by the Wall Street Journal all give a Buy rating for ENVX stock, with an average target price of $35.06 per share.