The clean tech sector anticipates challenges in the upcoming Q4 earnings, facing liquidity concerns and weaker-than-expected demand, as per JPMorgan’s analysis.
Clean Tech Stocks Show Varied Performance With One Standout
Enovix Corp ENVX is the exception among clean tech stocks, with JPMorgan offering a bullish outlook on its potential for significant revenue growth, particularly in the consumer electronics and EV market.
JPMorgan has set a price target of $18 for the stock, representing over 50% upside from the current price levels of approximately $11.85 per share.
Sector Struggles: Underperformance in Clean Tech Not Limited to Enovix
The clean tech space has seen underperformance in sectors such as EV Charging, including ChargePoint Holdings Inc CHPT and EVgo Inc EVGO, as well as Hydrogen with Plug Power Inc PLUG.
“We expect clean tech companies to adopt a defensive stance broadly, with several likely to have experienced a challenging 4Q,” said JPMorgan analyst Bill Peterson.
Recent market sentiment has led to a reluctance among investors to take long positions, with many opting to trim their holdings. 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 due to uncertain demand influenced by macroeconomic factors.
Enovix – Positioned for Success in Clean Tech
Enovix stands out in the clean tech landscape, being rated Overweight by JPMorgan and well-positioned relative to its peers. The optimism is predicated on 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.
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.