I didn’t think the +$5 initial bump in price was deserved. The YBS infusion of $70 million was signed and locked down for Fab 2. This investment had been previously disclosed. Signed and sealed is a positive as is the effect of lowering ENVX cash burn and cap ex. They beat their prior guide of 18,000 batteries produced in the quarter, handily beating the 18,000 unit guide vs 22502 actually produced. Again, progress being made. They confirmed Fab2 should start producing next April. Similarly they announced they will produce 600,000 batteries for the Army in q4, 2024. They named 3 smart phone makers they are working with ViVo, Xiaomi, and Lenovo. Interesting factoid was regarding foldable phones needing 2 batteries currently can use one ENVX higher density battery. To me another good execution quarter. Progress being made.
Correction: The batteries for the Army will be delivered in Q4 2023. And the revenue from the delivery will be $600,000, not 600k batteries. Total revenue funnel increased to 1.59 billion. This to me is an indication of interest in the batteries and the size of their TAM. If they execute, I have no worries about them attracting business.
MONYMAN3, In my opinion a correction of that magnitude should have flashing neon lights all around it to make sure that those who saw the original claim of 600,000 batteries see the correction. The difference in importance between a $600,000 order (trivial for the US Army), and an order of 600,000 batteries, is mammoth! For example $600,000 is LESS than 1/10th the cost of ONE US Army battle tank.
Saul
Sorry Saul, I don’t know how to do that. Apologies to all for the mistake. On the plus side ENVX did say they view this contract could be worth millions: “Now, we noted that the total size of the U.S. Army order for pre-production cell, these are pre-production cells that they’re going to put into early prototypes of their vast is nearly $600,000 for this year predominantly in Q4. But this is just a first step in what we hope will be a very significant business in the multiple tens of millions of dollars in the years to come. And that’s why we are super excited by this opportunity. And we are working on making these things happen in our Fab-1.”
It does sound as though they have high hopes. I hope they come true for all the Enovix investors on the board.
Saul
Thanks, Saul. I hope your arm feels better and healing well!
As Saul mentioned, Enovix’ current revenues are miniscule. The case for an investment in ENVX is based on whether one believes the new executive team can ramp up production and deliver enough batteries to supply the ever increasing demand. Wednesday’s conference call reaffirmed my confidence in this new management team and the company’s potential going forward.
First, they produced 22,502 batteries in Fab-1. This exceeded the forecast made last quarter to make 18,000. The Q3 forecast of 36,000 batteries looks exceedingly attainable.
Secondly, the agreement with YBS Manufacturing for $70 million non-dilutive financing to fund the Gen2 line in Malaysia was formally finalized. YBS, under the direction of Enovix, will provide the building and capital for equipment and labor for Fab2 and the Gen2 Autoline. As a result, Enovix was able to lower CapEx guidance for the year from $240 million to $190 million.
Thirdly, Dr. Raj Talluri, President and CEO announced they officially established a new dedicated R&D center in Hyderabad, India.
“The region is a strategic location for us due to its deep pool of technical talent in fields that are of utmost importance to our long-term success, as well as its business-friendly environment.” Apple and Meta are just two of the many tech companies with factories in Hyderabad.
Fourth, Dr. Raj Talluri’s visited several customers in Asia over the last month. “I am super excited and really happy to report that we now have secured engagements with some key smartphone manufacturers, Vivo, Xiaomi, Lenovo being three of them. Now, Xiaomi and Vivo are the top five global OEMs. Lenovo is a Motorola’s brand and number three in the U.S.”
That these producers would allow Enovix to publicly announce a working relationship with them seems significant.
“For the third quarter 2023, we are forecasting to produce approximately 36,000 units from our Fab-1. Our plan for the rest of the year is to make as many small cells as needed to support the commercial launches of the customers, and also qualifications of the customers that have designed in our products from Fab-1.
But we also want to focus on higher value projects and higher value opportunities that we’ve recently come across that have come to us from building larger cells and with BrakeFlow, a technology that’s very, very important and provide safe batteries to U.S. Army and the other customers.
This new pivot seems important.
The current $3 billion valuation is expensive and based on forward looking expectations. Although we won’t know until April 2024 if the Fab 2 line will produce the volume promised, it seems to me there are countless opportunities for strategically timed positive announcements of POs and additional partnerships to act as catalyst to drive further price increases in the stock.
From the call management shared so much positive news re: customer acceptance and excitement for the Enovix battery that it’s hard to distill down all key details here.
The first analyst question was, out of the 180,000 batteries being produced this year, what percentage is for testing and what percentage is made for end use?
Raj Talluri
“It’s really hard for us to say what percentage is actually for the customers going to production, and what percentage is for testing. Honestly, we’ve had so much opportunities now coming our way, particularly with the new large sales opportunities that we are focusing some of our resources also on making sure that we can support that for the U.S. Army.”
Ralph Schmitt VP of Sales added later “our customers have validated the technology as sound and have audited actually our business, and that it’s scaling properly.”
“Enovix has the most exciting business opportunity that I’ve had in my career, and frankly, I’ve run some pretty interesting tech companies, but I believe there’s just an amazing opportunity here.I’ve never been involved in a business situation where there’s an insatiable demand for a product that has a clear market leadership, and we’re engaged with every market leader in the consumer world.”
Raj spoke at length about the necessity for better batteries to fully utilize the power of AI. He specifically used Adobe’s Lightroom as an example. Without a superior battery, phone and other wearable manufactures can’t deliver on the potential of their product’s significant upgrades.
Re EV batteries Raj said “Yes. As I mentioned, we are making steady progress in that area. We now have – we’re able to further quantify as we fast charge what is the benefit of our architecture in terms of fast charging. And as I mentioned last time, we are working with a couple of EV OEMs in working with the material stacks that they would like and how we can put them in our architecture and get them some samples. It’s moving and I don’t have any new milestones to share today, but I’m optimistic that we’ll be able to give more data before the end of the year.”
For anyone considering investing, I would encourage you to read the transcript or watch the video on the company website. COO Ajay Marathe zoomed in from Malaysia and gave a great update on the Fab2 progress.
For a truly professional analysis, this investment report is outstanding. https://4518141.fs1.hubspotusercontent-na1.net/hubfs/4518141/Content%20Offers/2023.07%20Massif%20Enovix%20Research%20Paper/2023.07%20Massif%20Enovix%20Research%20Paper.pdf?__hstc=85836102.ebcc518a3dca34c1b8e7f577f1433dbd.1690555946441.1690555946441.1690556216148.2&__hssc=85836102.10.1690556216148&__hsfp=247259780&hsCtaTracking=009b61ff-b2ad-4180-92d7-cf22f6075d8f|95f09d9a-ebff-48ce-a776-c5d9437258b0
As Saul has clearly articulated, this a company with minuscule revenues. A $3 billion market cap for a company with total 2nd quarter revenue of $42,000 seems insane unless one also considers the revenue funnel increased by 9% to $1.59 billion from $1.46 billion, due to overall customer opportunities growing by 14% to 121 from 106 QoQ.
The stock closed Friday at $19.83. After Wednesday’s call, shares rose as high as $23.65. The stock shot up at Thursday’s open, then throughout the rest of the day I watched as the price was systematically driven down. Major players are shorting the stock. Retail investors don’t hold 30 million shares in shorts. Having a long term view definitely helps my stomach handle these wildly dramatic swings in share price. Next April I can envision the stock at $30. If Enovix continues hitting all their manufacturing goals and they secure a solid share of this ever growing market TAM, who knows how high the stock can go.
Thank you.
JT
One thing I found interesting was the comments by ENVX about foldable phones. Apparently, each side of the fold generally currently needs a battery. This can result in a thicker form factor. ENVX can alleviate this with one more powerful battery or 2 thinner batteries. I have increasing be seeing foldable phone being advertised on TV. I know Samsung offers one and I just saw an ad from Galaxy on one.
Canaccord Genuity 43rd Annual Growth Conference Good overall view from last week’s Canaccord Conference.
Great overview of Enovix written in easy to understand language here:
I’ve spoken to some folks in the inner-circle and these guys are serious. And have a seriously long resume of success. I have placed my own bets accordingly.
The time to make those bets for the greatest returns is before the market has rid itself of all the uncertainty.
Humbly,
Monkey
@7flyingplatypus
Thanks @MONYMAN3 for the video of the interview with the Enovix CEO at the Canaccord Genuity conference earlier this month (and also thanks to @JTMatrix9 for bringing the company to our attention). It’s certainly early days but it’s very promising from what I can see.
Here are my takeaways from watching the interview:
The sticking point now is how soon they can make equipment that enables them to manufacture these batteries at a high rate. They have a pilot plant in Fremont with equipment that can make 100 units/hr. They’ve got a plant in Malaysia that is production-scale, expected to come online in April 2024, and they are custom-designing and building equipment expected to make 1350 units/hr. From there, they would scale up by adding more production lines in the same plant.
Market demand will be for tens of millions of units per year or more, so the primary risk, according to the CEO, is how long it takes to sort out issues that get in the way of scaling up volume. Note that per @MONYMAN3’s earlier writeup, this doesn’t necessarily mean they have to do all the manufacturing themselves – but if they can’t do it themselves, they won’t be able to teach anyone else to do it either.
The same battery architecture they’re producing now gets scaled up to support everything from watches to EVs. So the claim is that
- the technology risk has been addressed;
- the market is very hungry for a battery with higher energy density and the ability to prevent “runaway” battery fires and fast charge times;
- the primary risk is whether they can make enough of the batteries fast enough to satisfy the customer demand.
The machinery for the Malaysian plant is supposed to ship out by end of 2023. The plant is supposed to be sending out sample batteries to customers in April 2024. These are the next “proof points” I see ahead for checking whether things are going as planned.
I’ve taken an initial modest position and will be ready to buy more when I see good news on the manufacturing front.
I’m sorry, but I feel obliged to reprint my post from July below. This company may do well and some time in the future, but it has a long, long, way to go to be a successful company.
Five weeks ago, about when this thread was started and people were actively touting this company, Enovix stock hit $23.85, give or take a few cents. It closed yesterday at $13.14, down 45% from that high. That’s quite a drop in five weeks. Please be careful with a stock like this! It’s not a growth stock yet. It’s a “hope stock!”
Saul
“Please be careful with a stock like this! It’s not a growth stock yet. It’s a “hope stock!””
Saul’s not wrong, exactly. But I think this is an instance of binary either/or thinking.
It is true they are for the most part pre-revenue, so there’s no “growth” yet.
But it is not true that the progress they are clearly making on both the manufacturing side and the customer contracts and relationships and qualifications side is mere “hope.” The evidence can be seen with one’s own eyes in their podcast and press releases.
So I would argue they are somewhere more subtle than either growth or hope.
It’s all a matter of probabilities no matter what stock you invest in, large or small, too big to fail or destined to fail.
But if you want a shot at massive gains, you have to take calculated risks based on likely outcomes versus improbable ones. If you’re right before the market catches on, you will be rewarded in proportion to how much “hope” was still implicit in the stock price.
I would argue that despite appearances as a “hope” stock, the probability of Enovix’s success is larger than the market is giving it credit for. Hence my investment and tolerance for risk, given the non-hopey nature of the actual evidence I’m already seeing.
Could Enovix falter? Of course. As could every other company and its stock.
If you want massive gains, you have to be willing to invest intelligently in the land between hope and dreams and a guaranteed sure thing outcome.
I call this the land of green bananas: it’s a banana alright, and in the right conditions, it will turn yellow. That involves less of what I call hope and more of what I call waiting.
Hugs,
Monkey
@7flyingplatypus
Monkey, the entire paragraph from which you took that quote “Please be careful with a stock like this! It’s not a growth stock yet. It’s a “hope stock!”” … read like this:
Five weeks ago , about when this thread was started and people were actively touting this company, Enovix stock hit $23.85 , give or take a few cents. It closed yesterday at $13.14, down 45% from that high. That’s quite a drop in five weeks. Please be careful with a stock like this! It’s not a growth stock yet. It’s a “hope stock!”
Today it closed at $11.73. That’s down more than 50% in a little over two months from its high. Do you really think I was wrong in telling people to be careful with a stock like this ???
After all, I did mention in my original post that if they went beyond all dreams and multiplied their current revenue at the time by 100 times , they’d have $2 million in revenue, and wouldn’t even be close to covering their cost of revenue (which would be a lot larger than $12 million), not to mention their total operating cost which would be way, WAY, more than the then current $63 million (with 100 times current revenue).
Saul
Of course you were not wrong, Saul. When a stock drops 50%, it’s a bad outcome no matter the reasons.
But let’s remember that even full-bodied growth stocks – not hope stocks – like CMG, NFLX, NVDA, TSLA, DDOG, NET, UPST, etc. have all shown a capacity to drop 50% when they appear to be growing with no hope requried.
So the issue is not that Enovix fell 50% from when you were advising people – rightly, in hindsight, and in the short-term – that it’s dangerous.
The issue I’m piping up about are the reasons why it might or might not have been dangerous, or continues to be.
And to that end, I was suggesting that to call Enovix a pure “hope” stock was not accurate because they are actually building things and ramping manufacturing and signing clients. The revenue will come. That’s less a matter of “hope” than it is patience.
And for investors who want to take on a higher risk/reward proposition, then enovix fits the bill.
At what valution, of course, is a different question, and of course today’s stock at $12 is a much better proposition than it was at $23.
But again, that’s less about Enovix being a hope stock and more about what price is a good one to take on the risk entailed. Being a pre-revenue company is in fact a bet that a lot of things have to go right in the future. I suppose a kind of hope.
But growth stocks, a few I mentioned above, have the same exact problem. I don’t think it’s fair to say DataDog for example was a hope stock. They were making revenue, had the SaaS model behind them, were oozing cash. Growing fast. And they too, got taken to the deep jungle and fed to the crocodiles at one juncture on their recent journey.
So growth or hope, as binary categories, are missing some nuance in the grey zone. Which is where I think enovix currently lives. It’s a growth story in which a lot of things have to go right, but which are seeming to go right, with each update the company posts.
There’s good reason to invest in a company like this at this stage: much higher returns upon success than when all the risk is off the table.
So not disagreeing, but hoping to add some nuance to what it means to call a stock “hopey.”
Hugs,
Monkey,
@7flyingplatypus
Monkey, you seem to be investing by looking for risky but possible 10 baggers or 100 baggers. That’s not necessary in order to be very successful. Bear, for instance, has never had a 10 bagger, ever, but his entire portfolio is up 17 times in a little less than 7 years. (That’s a 17 bagger on the whole thing). I’ve never had a 10 bagger that I remember, but in just under 30 years of investing, I have multiplied my portfolio by 544 times. That’s a 544 bagger on the whole thing.
Granted, Enovix may do well at some time in the future, and I wish you well with it, but you don’t have to take such wild risks to be successful in investing. JMHO
Saul
I can’t help but chime in here. As Vince Lombardi said, “Three yards and a cloud of dust”. I am from Brooklyn/Bensonhurst and grew up in culture where many people wanted to get rich quick - always playing longshots. I still get calls from guys wanting to buy doggie coins and play meme stocks. ALL those people flamed out. My friends who are now wealthy all had the same quality. They did one thing well, stuck to it for the long haul. I know I’'m pulling us off topic but that gambler’s mentality, that swing for the big fences mentality in my experience I have never ever seen it work. And often seen it catastrophically fail.
And this yet again speaks perfectly to the ethos here - to invest in what IS - companies putting up elite numbers. Not what could be - companies that will generate fuel from algae, etc. Also, the Saul style has huge psychological advantage. Less attachment. If one has a 100-bagger by the tail, after 1, 2, 3, 4, 5 bags it’s hard to hold onto to them. So you need to be 1) right 2) insanely patient for decades! 3) fight psychology of wanting to protect winnings.
I love the monkey but monkey going Dostoevsky here and respectfully should quit chasing giant mythological bananas. And yes I know monkey only playing small part of his banana stack with longshots but they eat up massive mindshare better spent elsewhere.
PS - Saul/Bear nailed absurdity of Samsara short report and again it was based on what could be - china chip shortage! Possible fraud that can’t be clawed back! And as we speak what IS - their solid numbers - kicked the report to the curb.
This thread has devolved to absurdities. I had a tiny position in Enovix for about two weeks just to “keep it on my radar.” But then I realized there’s no way I was going to add to the position any time soon no matter what it did so I sold it. Good luck if you have a position - you’re going to need it.
That is exactly the thought I’ve had and have been wanting to articulate. I’ve almost never seen the search for undervalued gems pay off. Sure we can all think of one or two. I remember a guy on here (Putnid?) who was in Enphase at ~1.00 or so when it was near bankrupt (I think) in 2017. It went to $300+ in 2022. Imagine he took some huge gains along the way.
But I find that my journey toward consistently beating the market has entailed figuring out what stocks/companies to say no to. I don’t need world beaters…I need good companies that do well and beat the market. If my average stock can gain 25% or even 50% this year, I’m in a great spot going into next year. That’s repeatable success and a realistic goal, and the magic of compounding means if I can keep that up, the 10 yr or 20yr returns will be incredible.
Averaging a 25% gain for 20 years = an 8,573% gain. $100,000 turns into $8.67m.
If my average stock goes nowhere this year, or even goes down, perhaps because I concentrated into a position that’s losing money when I could have been making money elsewhere…then I’ve already handicapped my portfolio going into next year.
There will be losing years like 2022. But overall, consistency can overcome the down years, even without huge once-in-a-blue-moon type wins. It’s just math.
Bear