Clean Tech Companies In 'Defense Mode' Ahead Of Q4 Earnings, Yet Analyst Says This EV Stock May Offer Over 50% Upside

As the clean tech sector faces headwinds amid liquidity concerns and weaker-than-expected demand, JPMorgan’s analysis suggests that clean tech companies are likely to adopt a defensive stance in the upcoming Q4 earnings.

Clean Tech Stocks Have Underperformed Market With 1 Exception

Clean tech stocks have largely underperformed the broad market over the past year. The only exception appears to be Enovix Corp ENVX.

JPMorgan remains bullish on Enovix’s potential for significant revenue growth, particularly in consumer electronics and the EV market. Analysts set a price target of $18 for the stock, grounded in cautious assumptions about manufacturing line installations, presenting a potential increase of over 50% from the current price levels (approximately $11.85 per share).

Clean Tech Has Largely Underperformed

On the other hand, the underperformance in the Clean Tech space has been more pronounced in sectors such as:

• EV Charging – ChargePoint Holdings Inc CHPT & EVgo Inc EVGO
• Hydrogen – Plug Power Inc PLUG

“We expect Clean Tech companies to stay in defense mode broadly, with several likely to have experienced a challenging 4Q,” said JPMorgan analyst Bill Peterson.

These recent developments have garnered controversy and skepticism among investors:

• Plug Power Stock Up 26% In 5 Days – Fundamental Rally Or Short Squeeze?
• Plug Power’s Rocky Road As Hydrogen Dreams Face Financial And Regulatory Challenges
• ChargePoint Trims Staff By 12%, Aiming For $33M In Annual Savings Amid EV Charging Race
• EVgo’s Challenges Ahead: Analyst On How Price Competition And Regulatory Credits Could Impact Margins And Returns
• Tesla Dominates EV Charging Race Installing 6,000 Fast Chargers In 2023, ChargePoint And EVgo Struggle To Keep Up: Report

The prevailing negative sentiment has led to a reluctance among investors to take long positions, with many opting to trim their holdings instead. Short interest across the sector has climbed to over 20%, indicating a cautious approach and aligning with the bottoming sentiment around the EV value chain.

Peterson anticipates that Clean Tech companies will continue to prioritize cost-saving initiatives and capex reduction throughout 2024, given the uncertain demand influenced by macroeconomic factors.

Enovix – Potential Standout In Clean Tech

Peterson identifies Enovix as a potential standout in the clean tech landscape. Currently, rated Overweight by JPMorgan, Enovix is well-positioned relative to its peers. The optimism is attributed to several positive catalysts, including the completion of Factory Acceptance Testing and Site Acceptance Testing, marking the commencement of high-volume manufacturing at Fab-2.

JPMorgan expects Enovix to report modest single-digit millions in revenue for Q4 2023, driven by contributions from acquired Routejade and ongoing shipments to the U.S. Army. The completion of testing milestones and the strategic deferment of spending away from Fab-1 in California are seen as positive developments.

Peterson emphasized Enovix’s focus on reducing cash burn while maintaining business opportunities, with expectations for a full year of about $20 million in revenue in 2024.

Enovix’s transition to Fab-2 is a long-awaited event, and JPMorgan anticipates positive outcomes, including sample production in 1H24 and high-volume production in the latter half of the year.

As clean tech companies brace for a challenging Q4, Enovix’s strategic moves and upcoming milestones position it as a potential bright spot, according to JPMorgan’s analysis.

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