The New $1.2 Trillion Energy Storage Opportunity Means We Own EOSE
Dear Transformity Ultra Growth Investor,
Action to Take: BUY EOS Enterprises EOSE Up to $30 with $85 Target end of 2022
Regardless of your politics, there is a new sheriff in town for national political power. How do I know? Eh, after 24 years in DC and NYC, I know a few people in the GOP and Democratic parties, respectively. And let's just say that after the horrors of Wednesday instigated by a Republican POTUS and by 120 GOP House Members and Senators, that the GOP "brand" is a little tarnished right now, to say the least.
Key Point: Non-partisan voters in key states who are NOT in climate change denial are going to become the marginal voters in 2022 House and Senate races in many key states. My contacts tell me "The Trump GOP Wrecking Ball" is going to have major consequences and ramifications for attracting non-partisan non-climate change deniers aka "Independents" to vote Democratic in 2022.
All of this means that now, with 50 Dem Senators and control of the House, Senate and control of the White House, the Federal money Green New Deal spigot is about to be turned on which means the Race to Decarbonize American energy is about try and catch up with Europe and Asia as a public spending priority.
That new reality brings us to the infrastructure of the Decarbonized World Economy--starting with energy storage and EOS Enterprises (and a few other pure plays on the new distributed energy grid that is required to decarbonize and lower the carbon footprint of the American economy).
While Lithium-based batteries rule the EV world, zinc-based batteries are fast becoming the standard for green energy storage--electrical power generated from non-carbon technology. The primary advantage is the price--as in 50%+ lower price.
$1.2 trillion TAM for Energy Storage
· The global energy storage market is expected to increase approximately 25-fold by 2030, driven by the convergence of two technologies (i) low-cost renewable generation and (ii) rapid reduction in battery costs and improving efficiency.
While fuel cell stocks that have been around for 30 years and never made a penny of profit (FCEL PLUG) have gone berserk (I swear the reason Fuel Cell in valued at 32 times revenue is its NAME and ticker) . . .
. . . EOSE has a proprietary battery technology aimed at grid storage which is going to grow massively over the next decade. From a high level, it’s fairly easy to understand that the more wind and solar energy that are deployed into the electricity grid the greater the demand for storage solutions given the uneven production of those power sources.
A report from Mackenzie called for grid storage to grow 13x in four years to 158 GWh in 2024. In the EOSE investor presentation from October, they show market forecasts of 348 GWh our new build storage by 2030 or over $200 billion of storage investment.
Now with the Green New Deal a done deal, the acceleration in both wind and solar generation of the last few years soon to be on steroids makes these forecasts seem way too small.
Source: EOSE Investor Presentation October 2020
EOSE’s battery technology is not suitable for mobile applications (EVs) but the proprietary Zinc Battery has multiple advantages over Li-ion when it comes to grid storage. Li-ion is currently over 90% of the storage market today, but EOSE WILL gain market share big time as presold production comes online for their current generation and next-generation platform to be introduced in 2021.
Here are a few articles about Zinc batteries over taking Li-ion
Meets Zinc, the Cheap Metal Gunning for Lithium Battery Crown - Bloomberg
California Sees Zinc As Likely Successor To Lithium-Ion In Energy Storage - Forbes
Source: EOSE Investor Presentation October 2020
EOSE expects to generate $50M this year, growing to over $700M by 2023. More importantly, this forecast is driven PURELY by their current orders backlog and pipeline that is over ~15 GWh. Also, the company is now very well-capitalized and can put the manufacturing capacity in place to fulfill demand. Obviously, there are many risks to EOSE achieving this forecast, but given the demand backdrop I think it is at least achievable.
Valuation: If we give EOSE the historic FCEL revenue multiple of 3.8x on the 2023 estimate, the stock is worth $52.00.
If I give EOSE the 23x multiple FCEL is currently trading on the consensus revenue estimate for 2023 ($152 million) the stock is worth $252.00!
Our EOSE $85 price target is simply 6X multiple on 2023 sales at a 25% discount.
Source: EOSE Investor Presentation October 2020
https://www.sec.gov/Archives/edgar/data/1744494/000114036121000339/nt10016622x5_ex99-1.htm
This brings us to California—the 5th largest economy in the world. California needs batteries. When California is on fire, it needs batteries that can keep a home, a hospital, a fire station, a senior center running longer than the four-hour standard of lithium-ion.
Thus California ground zero for off-the-grid energy storage (can you say out-of-control wildfires now every year for a decade caused by electrical wires on the ground downed by high winds). California officials expect zinc energy-storage technologies to help the state attain 100-percent clean energy by 2045, proving cheaper and safer than lithium-ion while holding a charge longer.
“Most companies, hospitals and private homes are looking for 25 to 50 hours of storage,” said Mike Gravely, research program manager at the California Energy Commission. Gravely adds in an interview from Forbes, “Some of them are looking to provide residential homes the storage they need to ride through these PSPS (public-safety power shut-off) events that California has, or to provide the reliability and resiliency that a home should have, and they're in the size that they would fit in your garage, or they would fit something about the size of an air conditioner.
“If you look past lithium-ion, zinc is the next metal that's the most popular for energy storage, and it does appear to be able to provide performance equal to or better than lithium if given a chance,” Gravely said in a webinar hosted by the Clean Energy States Alliance. “So we have projects where we're doing zinc batteries at the residential level, the commercial level, and the industrial level.”
The state plans to install 2,400 megawatts of energy-storage through 2023, about 90 percent of which are based on lithium-ion technologies. But state officials estimate they will need another 20,000 to 30,000 MW of energy storage by 2045.
“In November of last year, over two million resident people in California were impacted by wildfire PSPS events” in which utilities shut down portions of the grid to prevent equipment from sparking fires during flammable conditions. “The average short outage was 11 hours, and some of it went as high as three to five days.”
During those outages, senior centers and hospitals have relied on diesel generators to supply electricity for critical-care equipment, but during wildfires, diesel fuel can also be hard to come by.
The answer is microgrids and zinc battery storage--and California is just one use case. As millions of companies like Amazon and Walmart are committed to 100% decarbonizing their supply chains and last-mile delivery infrastructure, they need massive amounts of zinc-based power storage.
Look--as I like to say--we live in a "Decaronize My Planet, Bro" world where the new marginal buyers of stocks--Zoomers and Millennials with 30 million new no commission brokerage accounts--are investing in a decarbonized future. As this zinc battery energy storage story gets out to the mainstream public (especially California based Robinhooders & SoFI'ers), we should expect multiple expansion in the microgrid and zinc battery storage spaces for years to come.
Buy EOSE Under $30 and store it away for the next few years at least.
PS: Here are the Ultra Income and Ultra Growth portfolio for further inspection--good idea to copy them and keep them handy:
https://transformityresearch.com/ultra-income-portfolio
https://transformityresearch.com/ultra-growth-portfolio