FREYR Battery Is An Interesting Play On EVs: At Rock Bottom

Key Points

• FREYR issued a favorable update, and the shares are moving higher. 
• Production is expected to begin this quarter, and revenue could come by the end of the year. 
• Analysts and institutions own the stock and are banking on the battery market doubling in the next 6 years. 

FREYR Battery NYSE: FREY is emerging as an exciting play on electrification. While some are focused on building vehicles or generating clean power, FREYR aims to produce energy storage solutions for all uses. The company is engaged in 3 primary avenues of research, including EES (stationary solutions), eMobility (public and mass transit), and EVs. While still in the pre-revenue phase, the company is making headway on its projects and has significant market support. The EV battery market is estimated at $45 billion in 2022. It is expected to double by 2029, and EVs will only be 40% of the US market then, so this is a long-term opportunity with significant upside potential. 

Headquartered in Brussels, the company has offices in Norway to support the establishment of operations at 2 projects, and it is also planning to enter the US market. The dual strategy aims to achieve the full benefit of the Inflation Reduction Act and green-energy-supporting initiatives in the EU. 

FREYR Gives Business Update 

FREYR Battery issued its Q1 report, and the news was better than hoped. The company reported a smaller loss than expected and provided favorable operational updates. The company recently opened its CQP and is on track to produce the first batteries this quarter. The first batteries will be used to test and accelerate customer conversations in sales preparation. 

The company also gave updates on 2 other projects that are currently underway. It says that Giga Arctic is progressing at a measured pace which Norway supports. Norway is committed to establishing itself as a hub for battery production and is making moves to address imbalances put in place by the Inflation Reduction Act. These are expected to aid FREYR in its progress. 

FREYR is also making inroads into the US. The company plans to build Giga America and is working to find financing. The proposed launch date for this project is 2025, but investors should expect delays given the current state of progress. Giga America will be built in 2 phases, eventually producing 38GWh capacity. Giga Arctic is expected to begin production towards the end of 2024.

The Sell-Side Is Interested In FREYR Battery 

The analysts’ activity in FREYR is light but telling. The 7 analysts with rating less than 1 year old have the stock pegged at Moderate Buy with a price target more than 125% above the current action. The activity in 2023 includes only 2 updates, and 1 is a downgrade, but both

are still Buy or Buy-Equivalent with price targets that are more than 70% above the recent action. As for the institutions? They are more bullish on this name and own nearly 80% of the stock. They’ve been buying on balance for 3 consecutive quarters, and the buying is widespread. Recent buyers include BlackRock, UBS, and Franklin Resources. 

FREYR Battery is down from its highs and has undoubtedly seen some volatility since the IPO, but the stock price is holding up fairly well, given the lack of revenue. The Q1 update has the price action firming at a significant support level that may be the bottom for price action. The risk is that lack of revenue will keep the stock moving sideways or lower because there are hurdles for the company to cross. Assuming FREYR can start production and generate revenue, the stock should trend higher by the end of the year.