On Thursday, Deutsche Bank maintained a Hold rating on ESS Inc. (NYSE:GWH) but lowered the price target to $0.90 from the previous $1.15. The adjustment reflects a cautious outlook based on long-term valuation and the recognition of ongoing risks associated with the company.
The firm's decision to modify the price target is rooted in a blended valuation approach, which takes into account the company's estimated sales and EBITDA multiple for the year 2027.
Deutsche Bank has chosen not to alter the share count in its valuation model due to the proposed reverse stock split, as the ratio for this split has not been disclosed yet.
Deutsche Bank has revised its 2024 revenue forecast for ESS Inc. downward to $24 million, citing recent delays that the company has experienced. This revision also impacts the adjusted EBITDA for 2024, which is now anticipated to be negative $66 million.
The bank's projections for 2025 have also been updated, with revenue estimates being decreased to $76 million. The adjusted EBITDA forecast for 2025 has been adjusted to a negative $53 million, again due to the lower than previously forecasted revenues. These updated figures indicate a more conservative stance on the company's financial performance in the coming years.
In other recent news, ESS Inc. experienced a delay in funding from a customer, resulting in the postponement of 12 Energy Warehouse units to the third quarter of 2024. Despite this setback, the company reported Q2 revenue figures of $348,000 and is optimistic about recognizing revenue for the delayed units in the third quarter.
In addition, ESS Inc. is finalizing a $50 million funding agreement with the Export-Import Bank of the United States to enhance its manufacturing capabilities. This additional funding is expected to enable the development of a second production line, increasing the company's capacity to over 1 gigawatt-hour.
Moreover, ESS Inc. is on track to introduce commercial Electrochemical Capacitors in the second half of 2024. The company is also projected to achieve non-GAAP gross margin profitability with its Energy Warehouse units by the end of fiscal year 2024.
TD Cowen, in response to these developments, adjusted its outlook on ESS Inc., reducing the price target to $1.50 from $2.00, while maintaining a Buy rating on the stock. These are recent developments that highlight the company's commitment to expanding its manufacturing footprint and its anticipated profitability milestones.
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