On Thursday, Oppenheimer changed its rating on ESS Inc. (NYSE: GWH) shares from Outperform to Perform. The firm's decision comes amid the company's efforts to lead in the long-duration energy storage market, despite facing delays from customers.
ESS Inc. has been successful in fulfilling its commitments, especially with a key Australian client, but the recent election results have brought about potential delays in domestic project decisions.
The analyst from Oppenheimer expressed optimism about ESS Inc.'s progress in delivering on its signed contracts. However, the company's current evaluation of financing options has led the firm to adopt a cautious stance. They are seeking more clarity on ESS Inc.'s capital structure and a more consistent delivery schedule before reconsidering their position.
Current U.S. manufacturing facilities for energy storage and grid hardening are expected to continue receiving support from the Inflation Reduction Act (IRA). Nevertheless, project developers and owners are taking time to reassess the risks within their portfolios and pipelines in light of the changing political landscape.
ESS Inc. has indicated that it is exploring different financing avenues, a move that has prompted Oppenheimer to step back until there is more certainty in the company's financial direction. The analyst highlighted the ongoing demand for long-duration storage technologies and remains confident in ESS Inc.'s potential to become a long-term leader in this market segment.
In other recent news, ESS Inc. faced a downgrade from Baird due to slower-than-anticipated adoption rates and weak Q3 results, with revenues of $0.4 million falling short of the expected $5.3 million. The company also reported an adjusted EBITDA loss of $18.9 million, more severe than the expected loss of $16 million.
The company secured a significant loan of $22.7 million from the Export-Import Bank of the United States (EXIM) to support the expansion of its production lines. ESS Inc.'s Australian manufacturing partner, ESI, secured a $40 million investment to expand its manufacturing capabilities using ESS Inc.'s iron flow technology.
Analyst firms including Deutsche Bank (ETR:DBKGn), Roth/MKM, and Canaccord Genuity revised their outlooks for ESS Inc., adjusting price targets and maintaining various ratings. These are recent developments that highlight the company's commitment to expanding its manufacturing capabilities and its anticipated profitability milestones.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on ESS Inc.'s financial situation and market performance. The company's market capitalization stands at $105.64 million, reflecting its current position in the energy storage sector. Despite the optimism surrounding its long-term potential, ESS Inc. faces significant financial challenges.
An InvestingPro Tip reveals that the company is "quickly burning through cash," which aligns with Oppenheimer's cautious stance and the company's exploration of financing options. This cash burn rate is particularly concerning given another InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year.
On a positive note, ESS Inc. holds more cash than debt on its balance sheet, providing some financial flexibility as it navigates the current market uncertainties. However, the stock's performance has been underwhelming, with a significant price decline over the past year, as highlighted by InvestingPro data showing a -55.39% one-year price total return.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on ESS Inc., providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.