On Friday, August 15, we hosted Enovix CFO Ryan Benton for a series of investor meetings. Our time with Benton was encouraging; his experience strengthens the management team, and we expect clients to have a similar impression. We got an update on CEO Dr. Raj Talluri’s customer tour in China, the warrant transaction, and the key catalyst of the first smartphone purchase order. We reiterate our Outperform rating, and advise adding exposure during any volatility ahead of an inflection in the Enovix story later this year.
Dr. Talluri was in China visiting smartphone customers and posted images on LinkedIn at Xiaomi and Vivo, two probable candidates for the lead customer, in our opinion. Six months ago, the team focused all resources on getting the lead customer over the goal line. Benton explained that the purpose of the China tour was to let customers know Enovix is open for business and now has bandwidth to reengage with more customers. The first qualification is the most arduous, but after Enovix debuts its first commercial success, we expect timelines to truncate as rival smartphone OEMs vie for allocation.
In our conversations with equity and convert holders, investors have been enthusiastic about the deal structure. Thus far, $50 million of the total $253.8 million has been exercised early. The stock has traded above $10.50 for 18 of the last 19 days, a strong indication it will trigger the early exercise feature of 20 out of 30 days, and the company will be able to close on the transaction well ahead of the October 1, 2026, expiration date. Management believes this growth capital will complete all four lines in Malaysia, providing a path to over $500 million in revenues by our estimates.
Benton was very confident that the deep two-year engagement with the lead customer has little risk of last-minute design tweaks and in securing a PO by end of year. We expect an order for roughly 100,000 units to get Enovix batteries in the field in a diverse set of regions, a common rollout technique in smartphones. The smallest of China’s OEMs produce 100 million units a year, so a 20% share will fill two lines in Malaysia. After the field test, we anticipate a large follow-on order and competition to set in among other customers for allocation.
Two Common Questions on Competition. First, how does David (Enovix) beat Goliath (ATL)? What is not understood is that even in China, smartphone OEMs desperately want a second source supplier for supply chain resiliency and leverage. On top of that, Enovix’s AI-1 is now the best in the industry at 900 Wh/L, besting ATL’s premier battery at 815 Wh/L by 10%, incredibly valuable to customers. Second, won’t advanced silicon materials render Enovix architecture unnecessary? They do provide higher energy density, but swelling still limits loading below 10%. Enovix’s design enables 100% loading of advanced silicon materials, a true “one plus one equals three” situation. We expect to see this in AI-2.
Valuation and Risks.
Enovix trades at 19x our 2026 EV/sales estimate. We expect volatility to remain as investors digest the impacts of the warrant distribution; however, underneath, management is executing against its key milestone of launching a smartphone product in the fourth quarter. We see any volatility ahead of the PO and ramp-up toward the end of the year as buying opportunities. Investor risks include technology risk with Enovix’s unique cell architecture, scaling risks and timeline shifts at Fab2 in Malaysia, customer concentration risks, and competition risks from incumbent and other next-generation battery technologies.
Remember the age old saying, “when the student is ready, the teacher will appear.”
I think it also mean, “when you are ready, the audience will appear.”
Guys, this speaks a different language ya. Back then, Dr. Raj is giving us the narrative that the OEMs don’t want to be seen working with Enovix as they are afraid of the incumbent renegotiating a better deal with OEMs.
This totally changes the narrative ya. 3 things are observed:
1. He is sharing outright and showing that they want to be seen working with these OEMs.
2. Why? Likely they are super confident that, they are the obvious choice for the OEMs moving forward.
3. The optics here to me, is like taunting the OEMs; if you don’t give us chance and use us in your next phones, you will be seen as stupid. Who wants to have the first movers advantage and be the talk of the town and secure market share in the next quarter/ year.
Enovix is consistent in their rebranding practice, and their AI-1 range of batteries is after the following verticals:
1. CE
2. Military
3. XR
4. IoT