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Hawk’s Nest

Put Sellers See Limited Downside in Next-Gen Battery Company Enovix (ENVX)

by | Sep 2, 2021

Enovix (ENVX) a recent SPAC merger that drew some unusual, bullish options flows on 9/1 with 2,000 January $15 puts sold to open for $2.65 and later with 5000 January $17.50 short puts opening $3.80. Shares traded up to $24 in July 2021 before pulling back to $14 and bouncing recently. The FY lows are down near $12 and above a big volume node at $17.25 – also aligning with YTD value high — has room to run.

The $2.37B company makes advanced lithium-ion batteries utilizing a 100% active silicon anode using its 3D cell architecture. This allows the company to be more capable of volume production of the most dense, high-energy batteries in the industry. Their primary markets are for mobile devices like smart watches and radios while they’re planning to expand into smartphone batteries with their next factory. The company expects to go into commercial production in 2022. ENVX sees the adoption of low-cost, high-density batteries as essential for driving longer-term trends like EVs and they expect to ultimately use their advanced cell architecture to make those larger-scale batteries 2025. The market they’re going after is huge, too, with the mobile computing battery TAM estimated to be around $13B by 2025 across wearables, computing, and AR/VR.

The main component of the ENVX battery structure is using an anode of 100% silicon rather than graphite which allows for almost 5X average density and better performance. The convention graphite anode has capacity of 800 mAh/cc while the Enovix solution is 1,800 mAh/cc. The other advantages to using a silicon anode is easier expansion during charging and low loss of litihium by manufacturing insets to help top off trapped Li into the electrodes. ENVX has a strong IP library and over $250M in funding and R&D towards their processes, giving them a nice first-mover advantage into the space.

ENVX is difficult to forecast since they have lofty long-term goals and in the earliest stages of commercialization. They are currently being used in a number of available products like the Garmin Fenix 6X, Motorola Razr, and Dell XPS 13. They have significant design wins with leaders in the PC markets, smartwatches, and AR/VR too. And there’s a national security backdrop for the company as well with the DOE laying out a blueprint earlier this year to make domesticate more lithium battery production over the next decade. China currently supplies about 70% of the world’s lithium-ion cell production. Analysts have an average target for shares of $28.50 with a Street High $32. OpCo started coverage with an Outperform and $32 PT on 8/16 noting that they are a pioneer in the commercialization of silicon anode technology with defensible intellectual property in product architecture and manufacturing processes.

ENVX will be at the Cowen Transportation conference on 9/8.