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On Tuesday, Canaccord Genuity analyst George Gianarikas revised the price target for ESS Inc. (NYSE: GWH) shares, lowering it significantly to $3.00 from the previous $8.00 while maintaining a Sell rating on the stock. The adjustment comes as the market for long-duration energy storage gains traction, which is critical as global power needs increase. According to InvestingPro data, ESS shares have declined nearly 69% over the past year, with analyst targets now ranging from $3 to $10. Despite the recent decline, InvestingPro analysis suggests the stock may be undervalued at current levels.
Gianarikas acknowledged the burgeoning interest in the sector, stating, "We see growing signs of momentum and interest in the nascent market for long duration energy storage.” Despite the positive market outlook, the analyst pointed out the variety of technology options available to customers, emphasizing the need to identify the likely market leaders.
ESS Inc., which specializes in long-duration energy storage solutions, is currently undergoing a transition in leadership with Kelly Goodman serving as interim CEO. The firm is actively seeking a permanent chief executive. Gianarikas noted, "We look forward to the announcement of a permanent CEO after the recent appointment of Kelly Goodman as interim CEO."
The Canaccord Genuity report also expressed a desire for improved financial results from ESS Inc. and detailed the importance of financing alternatives to provide the company with the capital necessary for operational flexibility and the introduction of new products such as the Energy Base.
The revised price target reflects updates to the Canaccord Genuity’s financial model for ESS Inc., including the issuance of approximately 5 million additional shares through an at-the-market offering. Gianarikas added, "Our assumptions include $13.5M raised at $2.75/share." The firm’s discounted cash flow (DCF) analysis assumes a weighted average cost of capital (WACC) of approximately 14% and a terminal growth rate of around 5%.
In other recent news, ESS Tech Inc. reported its Q4 2024 earnings, revealing a revenue shortfall compared to its guidance, with full-year revenue at $6.3 million, below the expected range of $9-11 million. This shortfall was primarily due to a partner’s inability to secure funding for orders, impacting the company’s financial performance. Despite these challenges, ESS Tech launched a new product called "Energy Base," focusing on extended duration and cost reduction. The company is actively seeking to raise at least $50 million to support its operations through 2026, exploring options such as an At-The-Market offering. Interim CEO Kelly Goodman emphasized the company’s innovative strides and future profitability prospects. ESS Tech is also working with financial advisors to manage its capital-raising process and has signed a credit agreement with the Export-Import Bank of the United States. The company anticipates a revenue ramp in the latter half of 2025, with moderate revenue expected in the first half.
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