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On Tuesday, Deutsche Bank maintained a Hold rating on ESS Inc. (NYSE:GWH) but significantly increased its price target from $0.90 to $9.00. This adjustment follows ESS Inc.'s completion of a 15-1 reverse stock split, which was necessary for the company to comply with New York Stock Exchange listing standards.
The bank's analyst has updated their financial model for ESS Inc., reflecting a reduced share count of approximately 11.9 million, down from about 176 million shares, or 178 million on a fully diluted basis.
The new price target is based on a blended valuation approach, which includes a 0.8 times multiple on projected 2027 revenues, decreased from the previous 1 times multiple, and a 9 times multiple on expected 2027 EBITDA, adjusted down from 10 times.
The revised multiples are considered by Deutsche Bank to be more in line with the current market conditions and the recent business update ESS Inc. provided with its second-quarter results. The bank believes these updated multiples are fair when compared to the company's peers.
ESS Inc., a manufacturer of long-duration energy storage solutions, has adjusted its business operations to align with the regulatory requirements of the NYSE. The change in share count and the updated price target reflect the company's current financial and operational position as it continues to navigate the market.
In other recent news, ESS Inc. has been the subject of several financial outlook revisions. Canaccord Genuity reduced the company's price target to $1.00 from $1.25, maintaining a Hold rating due to uncertainties in the energy storage market.
Deutsche Bank also maintained a Hold rating but lowered the price target to $0.90 from $1.15, based on a cautious outlook. TD Cowen, on the other hand, reduced the price target to $1.50 from $2.00, while maintaining a Buy rating on the stock.
Recent developments highlight ESS Inc.'s commitment to expanding its manufacturing capabilities. The company is finalizing a $50 million funding agreement with the Export-Import Bank of the United States, which is expected to enable the development of a second production line, increasing the company's capacity to over 1 gigawatt-hour.
ESS Inc. reported Q2 revenue figures of $348,000, despite a delay in funding from a customer resulting in the postponement of 12 Energy Warehouse units to the third quarter of 2024. The company remains optimistic about recognizing revenue for the delayed units in the upcoming quarter.
In addition, ESS Inc. is on track to introduce commercial Electrochemical Capacitors in the second half of 2024 and is projected to achieve non-GAAP gross margin profitability with its Energy Warehouse units by the end of fiscal year 2024. These developments underscore ESS Inc.'s ongoing efforts towards profitability and growth.
InvestingPro Insights
As ESS Inc. (NYSE:GWH) adapts to market conditions and regulatory requirements, investors may benefit from additional insights provided by InvestingPro. According to real-time data, ESS Inc. holds a market capitalization of approximately $85.82 million USD, which reflects the company's size and market value as of the latest quarter. Despite challenges, analysts have revised their earnings upwards for the upcoming period, indicating potential optimism in the company's financial prospects. Moreover, ESS Inc. has more cash than debt on its balance sheet, suggesting a degree of financial stability. However, it's important to note that the company is not expected to be profitable this year and has been quickly burning through cash, as reflected in the significant negative gross profit margin of -483.94% for the last twelve months as of Q2 2023.
InvestingPro Tips reveal that while ESS Inc. is experiencing sales growth, with a notable increase of 117.99% in revenue over the last twelve months as of Q2 2023, the stock price has been quite volatile and has fared poorly over the last month, with a -26.93% return. Additionally, the company's valuation implies a poor free cash flow yield, which is an important factor for investors to consider. For those looking to delve deeper into the company's performance and future outlook, InvestingPro offers a comprehensive list of additional tips to help inform investment decisions.
For a more detailed analysis and further tips on ESS Inc., investors can visit https://www.investing.com/pro/GWH, where a total of 17 additional InvestingPro Tips are available, providing a broader perspective on the company's financial health and market position.
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