Morgan Stanley says EV battery maker could surge up to 350%

The New York Stock Exchange welcomes FREYR Battery (NYSE: FREY), on July 8, 2021, to celebrate its listing.

NYSE

Freyr could see its stock double — if not quadruple where it is now — as the electric car battery maker builds up its customer base and production facilities and capitalizes on recent legislation passed, according to Morgan Stanley.

Analyst Adam Jonas called Freyr a top pick and raised his target price for the stock to $26 per share, double the price the stock closed on Tuesday. Jonas also said that his bull case scenario makes the stock hit $60, more than 350% above the previous close.

“The environment is set for FREY to become a true player in the global battery economy later this decade,” Jonas said.

He also said that Freyr is one of the few publicly traded energy storage systems, known as ESS, that is benefiting from the passage of the Inflation Reduction Act due to its focus on clean energy financing. ESS batteries are an essential part of electric vehicles, which have been in high demand in recent years as companies and consumers weigh their environmental and cost impacts against gas-powered vehicles.

Since the beginning of 2022, Freyr has signed agreements with Powin, Honeywell and Nidec – whose partnership represents one of the largest ESS battery contracts in the world. The company aims to expand the factories and produce them on the basis of a fully automated process within the next few years.

The moves raised Morgan Stanley’s revenue estimates for the company, raising the 2025 estimate to $400 million to $1.1 billion and the 2030 estimate to $3 billion to $8.3 billion.

For the revolutionary $60 target, the company will have to reach 300 gigawatt-hours, the unit of battery measurement, by 2035. The company will also have a 35% compound annual growth rate in revenue; 25% margin on exit earnings before interest, taxes, depreciation and amortization. The goal also suggests a share of about 5% in the auto industry by 2035.

Meanwhile, the base case assumes 182 GWh by 2035.

Shares are up 12% on Wednesday.

—CNBC’s Michael Bloom contributed to this report.

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