Bank of America initiated coverage on FREYR with $13 purchase rating
2023.02.10 13:42
Bank of America initiated coverage on FREYR with $13 purchase rating
By Tiffany Smith
Budrigannews.com – FREYR Battery SA (NYSE:) has received coverage from Bank of America with a price target of $13.00 and a Buy rating. The battery manufacturer is one of many new companies in the market, but it is also one of the few with a tested cell chemistry, committed offtake, and demonstrated success in raising strategic capital. The business intends to establish gigafactories in both Norway’s northern region and the United States. The business is not yet profitable, and it is likely to remain so until at least the middle of the next decade.
The new gigafactory business has had far more setbacks than successes thus far. However, FREY is considered by analysts to be the closest competitor to Northvolt, a European rival that has grown from an idea in 2017 to a reported $12 billion valuation in 2022 with more than $8 billion raised and more than $50 billion in orders.
“Today, the company is pre-revenue and will likely remain so through at least the middle of the decade as revenue recognition will accompany startup of giga-scale production, timing of which remains a key source of debate,” they wrote in a note.
However, the management team has been active ever since its 2021 PIPE offering and currently holds a number of supply allocations for raw materials, equipment, and inspection services. Additionally, it has a number of conditional offtake agreements and binding sales contracts for its future products.
Management has indeed laid the groundwork for success, with two sites officially announced in Norway’s Mo i Rana and Georgia’s Coweta County (commonly referred to as “Giga America” and “Giga Arctic” respectively) and a target of more than 100 GWh of productive capacity by 2028. However, the story of this execution is far from over. The reasons why we like the story, positioning, and current valuation are outlined below.
The valuation is at the heart of Bank of America’s rating and outlook. They estimate the fair value to be $13 under a SOTP framework that discounts project cash flows and is highly risky. With continued cash burn ahead of revenue inflection, the analysts are clear that there are significant downside risks. However, the risk-to-reward skew is compelling, and derisking a project should result in an increase in value.
Friday’s midday trading saw a gain of 1.24 percent for FREY shares.
