Enovix (ENVX) management hosted a two-hour-long presentation from their Fremont, CA factory yesterday afternoon that went deep into the company’s outlook for battery production, sales projections and customer interest. The team also talked about new senior management hires.
The bottom line is that there is a lot to look forward to. But management has, again, pushed back production ramp from the Gen2 production line (by about two quarters) as it wants to take the time to get things right rather than rush the process and deal with issues/lower yields. Part of this is due to triple-checking all aspects of the production line and fine-tuning the design schedule.
While sensible, the “be patient” message isn’t resonating with major investors that are becoming increasingly impatient due to a weakening macro environment flush with concerns about a recession. Risk appetites are dropping, as is ENVX stock (down 40% this morning).
On the other hand, management has said it sees Line1 production (which includes a lot of manual work) doubling each quarter (from about 9,000 units in Q1) in 2023 to reach 180,000 by the end of the year. This will include a mix of units sold at $5 and $10 each. Line1 will continue to be used for production with yield currently at 42.5% and rising to 60% by the end of the year.
The Gen2 line, which will be faster and higher yield with more automation, is expected to produce 9.5 million units a year at 80% efficiency. It’ll take about a year to get up to full production. Management is now saying that will be at a new Fab2 Southeast Asian site, to be approved in July 2023, since the economics in such a location are so much better than in the U.S.
Management says the design for this facility will be approved by March 15 and line equipment will be delivered in November. There should be at least four lines on site by the end of the year and samples ready by mid-April 2024. At about $150 million per line, Enovix will need to raise capital to get this done. It sounds like they could do more than four lines if they can raise enough. Enovix does not need cash now.
Management took questions from analysts from J.P. Morgan, Cowen, Oppenheimer, Loop Capital and more. This morning J.P. Morgan (has a buy rating) published a note advising patience. B. Riley keeps at buy but trims PT by 1, to 18. Enovix will present at a number of investor conferences in the next two weeks.
This isn’t the presentation, or response, that I expected. Given where we are now, we’ll move ENVX to hold through the upcoming presentations and see if management – including a new CEO and COO – can fill in details around the corners that increase investor confidence in the company’s future and help the stock begin to recover. HOLD