Enovix Stock Rises 35% in Short-Squeeze: This Rally Has Legs

Key Points

• Enovix announced two significant game-changing deals that validate the business. 
• Its silicon-anode lithium-ion batteries are well-suited for always-on devices such as VR headsets. 
• Short-covering is in play; analysts see ENVX stock rising another 20%, and institutions are buying, so this rally has legs. 

Enovix NASDAQ: ENVX stock surged 35% in a single day, and it looks like the rally has legs and room to run. The technical signal is strong, and fundamental factors are in play. Those factors include a new deal to supply batteries for a virtual reality headset that points to a new reality for ENVX investors. This company is gaining traction and building momentum; two large, high-profile deals now validate its technology. 

Why Enovix? Enovix is a leader in advanced lithium-ion batteries. Its silicon anode design allows for greater energy density, discharge, and recharge rates, making it perfect for most applications. Among the first wave of business are government and military clients that need a longer range and higher power output for their always-on applications. Those include aviation (drones) and man-portable equipment systems. Consumer applications likely to utilize Enovix battery technology include cameras, video recorders, PCs, and mobile and IoT-connected remote devices. 

A Double-Shot of Game-Changing News for Enovix Investors

Enovix's stock price was supercharged when it revealed a contract to deliver batteries for a prominent, California-based virtual reality headset manufacturer. The company did not reveal who the manufacturer was, but is likely one of a handful of names, including Apple NASDAQ: AAPL, Google parent Alphabet NASDAQ: GOOGL, and Meta Platforms NASDAQ: META. Apple is a leading candidate because the company mentions style in its press release. 

The deal includes an upfront payment for tooling, battery pack design, and future expenses for test and production models. The VR headset market is worth upwards of $32 billion today and is expected to grow by 10x over the next decade for a near 30% CAGR—quite a tailwind for the business.

The deal to supply battery packs for VR headsets is great news but is just the tip of the iceberg for Enovix. The company also announced a deal with Elentec Co, whose largest client is Samsung. Elentec provides battery packs for numerous Samsung OTCMKTS: SSNLF products, including consumer, industrial and military applications. 

The deal with Elentec is contingent on finalized negotiations but would allow Enovis to utilize Elentec Co’s capabilities and footprint for its battery production. The near-term goal is to adapt Enovix technology to fit Samsung battery packs and fast-track them to the broad market. The end goal is for long-term collaboration to support growth for both. 

Buy-Rated Enovix Has Growing Support from Institutions

Enovix’s analyst activity is light and tepid this year but will likely change soon. The takeaway is that this Moderate Buy-rated stock is forecast to advance another 20% from its current levels, and the forecasts may rise, given the rapidly improving outlook. Rising forecasts will provide another catalyst for higher prices. 

The more significant detail is that institutions are buying. Institutions represent the bulk of investment dollars and are powerful market forces. Institutions have bought this stock on balance for four of the last five quarters and increased their holdings to over 50%. Enovix’s share price will likely continue to rise with this trend in play. 

Enovix: Short Covering Leads to Sustained Rally

Short interest is a factor in the rally. The market for Enovix stock was more than 30% short at the last report but has likely fallen since. If not, it will soon because the technical outlook is bullish; higher prices are expected for this stock.

The rally for Enovix is supported by indicators, including volume, moving averages, MACD, and stochastic, firing strong signals on the weekly and daily charts. The candlestick action on the daily charts is also bullish, showing a Harami continuation pattern, and suggests market support is advancing along with the price action. In this scenario, shares of Enovix could surge another $4 soon to reach the $20 level and then another $4 by year’s end to set a multiyear high.