EV Battery Maker Freyr Set For Major Global Expansion

Key Points

• Lithium-ion battery maker Freyr is breaking ground on a huge factory in Norway, and analysts are taking notice, boosting the price target 

• The company is also looking to expand in the U.S. and Japan

• Freyr already struck a partnership with Volkswagen to develop lithium-battery technology for electric vehicles 

Clean-tech battery maker Freyr NYSE: FREY is proving to be a success story on several levels. The stock appears poised for more gains as the company ramps up to better serve the electric vehicle market.

The Norwegian company designs and manufactures lithium-ion batteries for various applications including EVs, stationary energy storage, and marine and aviation uses.

The stock gapped up at the open Friday, on news that it was beginning construction of a battery factory in Mo i Rana, Norway. This is a significant development, as it enables the young company to boost its capabilities in fast-growing markets, such as EVs. 

It would be the largest such plant outside China. It arrives at a time when international manufacturers are looking to source components from countries other than China. 

The stock price rallied 8.38% in the past month, 105.86% in the past three months, and 22.63% year-to-date, easily outperforming the broader market. 

Freyr shares got a boost on September 21, after Morgan Stanley analyst Adam Jonas raised his price target to $26 from $18, and gave the stock an “overweight” designation. Jonas also wrote a research note outlining factors likely to increase the stock price, including the new factory. 

The consensus rating on the stock is “moderate buy,” with a price target of $21.50, a 51.09% upside. 

Because the company is relatively new and without earnings, there's sparse analyst coverage. Even so, eight of the nine analysts following the stock have positive ratings, with the ninth being neutral. 

In December, Freyr announced a partnership with Cambridge, Massachusetts-based 24M Technologies and Volkswagen OTCMKTS: VWAGY to manufacture next-generation lithium-ion EV batteries utilizing 24M’s SemiSolid platform. The partnership aims to develop production technology for SemiSolid battery cells for Volkswagen electric vehicles.

“The development of next-generation EV battery cells based on 24M technology is a critical element of Freyr’s long-term strategy to speed up the adoption of affordable EVs,” said Freyr CEO Tom Jensen, in a release announcing the partnership.

Further solidifying Freyr’s commitment to the EV battery partnership, the company opened a Boston office in August, co-located with 24M. It also opened a facility in Japan, which, not coincidentally, is home to several major automakers. 

Although not confirmed, Freyr is reportedly in talks to build a lithium battery factory in the U.S. The company is said to have narrowed its selection criteria down to five sites. 

As you might expect, Freyr will likely benefit from tax advantages baked into the recently passed Inflation Reduction Act. 

The company is very much in start-up mode, having merged with a SPAC, Alussa Energy Acquisition Corp., to list on the NYSE. It’s somewhat of a unicorn, as many mergers from the SPAC boom have failed. 

Freyr is still pre-earnings and revenue, as it’s funded by private equity and public markets. However, there was much cause for optimism in the company’s second-quarter report in August. 

For example, it plans to replicate the model established by the upcoming Norwegian factory. It also expects more technology licensing deals, as well as partnerships with developers of complementary technologies, such as 24M. 

In addition, the company has maintained its capacity guidance through 2030, based on supply and demand dynamics in its core markets. 

Freyr is one of those stocks that seems well-positioned for future growth, although it’s not currently a leader when it comes to the fundamentals. In addition to its plans for organic growth, companies like Freyr often grow organically and eventually position themselves as acquisition targets. It wouldn’t be surprising to see various avenues that shareholders can be rewarded.