On Thursday, TD Cowen adjusted its outlook on ESS Inc. (NYSE: GWH), reducing the price target to $1.50 from the previous $2.00 while sustaining a Buy rating on the stock. The adjustment follows the company's second quarter 2024 results, which were notably affected by a delay in funding from a customer, resulting in the postponement of 12 Energy Warehouse (EW) units to the third quarter of 2024.
ESS Inc. is currently finalizing a $50 million funding agreement with EXIM to enhance its manufacturing capabilities. The additional funding is earmarked for the development of a second production line, which is expected to increase the company's capacity to over 1 gigawatt-hour (GWh). The new manufacturing line is anticipated to be operational by the end of the first half of 2025.
Despite the funding setbacks, ESS Inc. is making progress on other fronts. The company is on schedule to introduce commercial Electrochemical Capacitors (ECs) in the second half of 2024. Moreover, the company is projected to achieve non-GAAP gross margin profitability with its Energy Warehouse units by the end of the fiscal year 2024.
The delay in product delivery and subsequent financial impact were highlighted as key factors influencing the revised price target. However, the firm's continued commitment to expanding its manufacturing footprint and the anticipated profitability milestones were significant enough to maintain the Buy rating on ESS Inc. shares.
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