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This stock has tremendous potential that will soon be fulfilled. Up to 350% growth is in play, says a seasoned analyst.

Jamie Cameron
10. 10. 2022
6 min read

I haven't brought you an interesting stock pick with high potential in a while. Today, however, I'm going to remedy that and take a look at a company that has the potential for 350% growth. The company is very well positioned to see this prediction come to fruition, as it has undergone a number of significant partnerships and its products are considered key to the future of Europe.

Today's article will focus on $FREY-4.0% Battery $FREY-4.0%.

What is the company's business?

The company specialises in the production of materials needed for the manufacture of battery cells. It also sells batteries and battery cells to markets that include electric vehicles and energy storage systems for marine and aviation.

FREYR could see tremendous growth, which in a way it already is, but analysts say this is just the beginning of a long ride where Freyr will eventually end up much higher.

Why should the company continue to show strong growth?

Shares of $FREY-4.0% have gained a total of 73.75% since going public (2021).

Analysts are clear on this, the growth will be because the electric vehicle battery maker has been successfully building its client base and manufacturing facilities and benefiting from recent legislation that was passed. Analyst Adam Jonas called Freyr a top player in the industry and raised his price target on the stock to $26 per share. Jonas also said his bullish scenario calls for the stock to go to $60 (+350%).

"The environment is becoming ripe for FREY to become a real player in the global battery economy later this decade," Jonas said.

He also said that Freyr is one of the few publicly traded energy storage systems, known as ESS, companies to benefit from the passage of the inflation reduction law because of its focus on clean energy financing. ESS batteries are considered an essential component of electric vehicles, which have been in high demand in recent years as corporations and consumers consider their environmental impact and seek to reduce their costs.

As of early 2022, Freyr has signed agreements with Powin, Honeywell and Nidec, whose partnership represents one of the largest ESS battery contracts in the world. The company's goal is to expand plants and produce on a fully automated process over the next few years.

The moves have boosted Morgan Stanley's revenue estimates, increasing the estimate by $400 million to $1.1 billion in 2025 and $3 billion to $8.3 billion in 2030. In order to meet the $60 target, the company will need to reach a supply of up to 300 GWh by 2035, a unit of battery measurement. The company will also have a compound annual revenue growth rate of 35% and a 25% margin on output earnings before interest, taxes, depreciation and amortization. The target also assumes a share of approximately 5% in the automotive industry by 2035. The base case, meanwhile, assumes 182 GWh by 2035.

Freyr enters into very significant strategic partnerships

Freyr, a developer of next-generation clean battery cell production, said it has closed (among other things) the strategic partnership and investment announced between FREYR's partner 24M Technologies and Volkswagen Group to produce next-generation lithium-ion EV batteries.

  • As part of the partnership, Volkswagen is making a strategic investment in 24M. In addition to the direct investment, Volkswagen will establish a wholly owned subsidiary that will develop semi-solid battery cell technology for automotive applications in collaboration with 24M.
  • The development of next-generation electric vehicle battery cells based on 24M's technology is a critical element of $FREY-4.0% 's long-term strategy to accelerate the adoption of affordable electric vehicles.
  • Freyr aims to provide clean battery solutions at industrial scale to reduce global emissions. Freyr's mission, is to produce battery cells that will accelerate the decarbonization of energy and transportation systems worldwide. The company already boasts a factory in Norway, but has also announced a move towards Finland and the US.

Other major collaborations

The company recently announced that it will expand its existing offtake agreement with Nidec, increasing the volume from 31 GWh to 38 GWh, and that the offtake agreement will also be converted into a formal binding sales agreement.

  • This is a huge win for Freyr as the total value of the contract is $3 billion and the contract is expected to run from 2025 to 2030 using the Giga Arctic plant.
  • In addition, as part of this confirmation of a binding sales agreement, both companies have announced the formation of a joint venture where Nidec will have a majority stake.
  • I think this confirmation of the binding sales agreement and the extension of the scope of the agreement shows the strong demand for Freyr batteries, especially in the ESS business.

Giga Arctic ( $FREY-4.0% factory) is expected to be the world's most sustainable and capital efficient gigafactory!

Why? This is Freyr's first 29 GWh gigafactory in Norway - For the total capital expenditure of $1.7 billion expected for the gigafactory, Freyr has secured $1.6 billion in financial support from both the Norwegian government and other lending agencies. Thus, it can be assumed that the current capital expenditure of $61 million is lower than any other gigafactory in North America and Europe.

  • In my view, this could be a very exciting opportunity for FREYR if it is able to replicate such high capital efficiency for its subsequent gigaworms.
  • In fact, Giga Arctic will be a good first demonstration for Freyr to prove its capabilities in developing, implementing and scaling up factories on a large scale. Also, the fact that this new Giga Arctic is expected to have a capacity of 29 GWh, 3 times more than Freyr originally announced for the Giga 1 and 2 factories, shows the strong demand for Freyr batteries as the world continues to face a shortage of the necessary batteries needed for the transition to green energy.

Conclusion

The company certainly looks interesting, I'm particularly intrigued by the promising performance this year as it is a relatively young company that is slowly making its way to the forefront. Gradual expansion and forging interesting partnerships will not leave the stock cold in my opinion. A target of 350% may seem like a stretch, but that's because the company is expected to be a major component for the market in Europe. Plus, they offer products that will be supported by the Inflation Reduction Act, which are in short supply (at least for a full transition to electric mobility). Even if the bullish scenario doesn't materialize, they are still counting on production growth and benefiting from new partnerships (+ low cost gigafactory), which can still do great things with today's $15.29 per share price.

Note that this is not financial advice. Every investment must go through a thorough analysis.

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