On Friday, FREYR Battery SA (NYSE: FREY) received an upgrade from Neutral to Buy by a BTIG analyst, with a revised price target of $4.00. The upgrade follows FREYR's announcement last month regarding its acquisition of a 5GW solar module facility in Texas from Trina Solar.
This strategic move marks a significant shift from FREYR's original plan to focus on battery cell production for energy storage systems. According to InvestingPro data, FREYR maintains a strong liquidity position with a current ratio of 6.36x, indicating substantial financial flexibility for this strategic pivot.
The analyst noted that while the solar module manufacturing industry is known for its competitive nature and relatively low profit margins, FREYR's transition could lead to more favorable financial outcomes.
Previously, as a battery cell manufacturer, FREYR was anticipated to deplete its cash reserves of approximately $180 million within the next two to three years in pursuit of commercially viable batteries. InvestingPro analysis reveals that FREYR's rapid cash burn remains a concern, with negative free cash flow of $160 million in the last twelve months. Subscribers to InvestingPro can access 12 additional key insights about FREYR's financial health and market position.
The acquisition, which is expected to close in January, started commercial production last month and is seen as a major pivot for FREYR. The deal is valued at around $620 million, including approximately $430 million of debt.
The analyst believes that this acquisition will enable FREYR to begin generating earnings before interest, taxes, depreciation, and amortization (EBITDA) immediately after the deal is finalized.
This would mark a significant improvement from the current EBITDA of -$116.7 million. Based on InvestingPro's Fair Value analysis, FREYR currently appears to be trading near its Fair Value, with comprehensive valuation details available in the Pro Research Report.
The solar module facility's acquisition is a strategic step for FREYR, as it seeks to establish itself in the renewable energy sector. With the initiation of commercial production at the newly acquired facility, FREYR is poised to enter the market with a new operational focus.
The revised price target of $4.00 reflects the analyst's confidence in FREYR's potential to generate positive financial results following the completion of the acquisition. This development represents a notable change in direction for the company, which investors will be watching closely as the transaction concludes and FREYR begins a new chapter in its business operations.
In other recent news, FREYR Battery has experienced significant changes in its executive team and financial performance.
The company announced the departure of Lori A. Papp, the Chief Accounting Officer, with Evan Calio, the current CFO, taking on additional responsibilities as the Principal Accounting Officer. FREYR Battery also appointed Daniel Barcelo as its new CEO, with an annual base salary of $800,000, following the termination of Michael Brose as Chief Operating Officer and the subsequent appointment of David Gustafson.
On the financial front, FREYR Battery reported a net loss of $29 million in Q1 2024 and a narrower-than-expected loss of $27 million in Q2 2024, better than analysts' projections. Despite these losses, the company maintained a cash position of $253 million with no outstanding debt.
In terms of strategic partnerships, FREYR Battery ended its licensing agreements with 24M Technologies, relinquishing all rights to approximately 6.98 million shares of 24M's Series G preferred stock. This signifies a shift in the company's partnerships and technological direction.
Lastly, FREYR Battery secured a €122 million grant from the European Union Innovation Fund for a joint venture Cathode Active Material manufacturing project in Finland, with the finalization expected in the first quarter of 2025.
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