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Yields on U.S. government debt, which influence how much it costs companies to borrow money, have crossed psychological barriers not seen in decades. This is a headwind for businesses like Eos that are in the middle of expensive manufacturing expansions and are not yet earning a profit.
While Eos has secured a large loan from the Department of Energy, higher market rates generally make it more expensive to raise any additional cash. For a company plowing money into new production lines, these rising rates can delay the point where the business finally becomes self-sustaining.
Source: Bloomberg Markets and Finance
CEO Joe Mastrangelo sold nearly $1 million worth of shares in mid-September. While large sales from the top leader can sometimes worry investors, they are often planned in advance for personal financial reasons rather than being a comment on the business.
This sale comes as the company is hitting key milestones in its production capacity. Unless it is followed by more selling from other executives, it does not change the outlook for the company's goal of reaching full-scale battery production.
Needham reiterated its $10 price target, which is well above where the stock currently trades. This reflects a belief that the company's plan to automate its battery production will eventually pay off. The average target across all firms following the stock is about $7. While these targets are just estimates, the gap between the current price and these expectations shows that analysts see a lot of potential value if the company can successfully fulfill its large order backlog.
Source: Needham
Eos has drawn another $87 million from its loan facility with the Department of Energy. This money is specifically for the Thorn Hill facility in Pennsylvania, where the company is building its second automated line to reach 4 gigawatt-hours of annual battery capacity.
This is a major step because Eos needs to move away from slow, manual assembly to reach the scale required for profit. By using these government funds to automate, the company can lower its costs and start chipping away at its $807 million backlog of orders from utility customers.
Source: GlobeNewsWire
Management has consistently struggled to predict the high costs of scaling its battery production, resulting in seven misses out of the last eight quarters. This pattern suggests the path to profitability is more expensive and complex than leadership's own forecasts account for.
| Expectation | |
|---|---|
| EPS | $-0.33 |
| Revenue | $81M |
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