Amprius Technologies, Inc. (NYSE:AMPX) is a leader in battery technology using silicon anode lithium-ion design. Its products have diverse applications, delivering energy to drones, high-altitude pseudo satellites, air transportation, electric vehicles, and wearables. AMPX expanded its Fremont facility, enhancing production capacity from kilowatt-hours to megawatt-hours. Also, the company is preparing to operate a new site in Brighton, Colorado, by 2025. Additionally, AMPX is partnering with a former affiliate, a Brazilian company, to produce SiCore batteries to fulfill current market demands. I believe the stock's market cap seems quite small compared to its potential if management delivers on its promises. Hence, even though there are inherent risks related to AMPX's business, sector, and scaling ambitions, I rate AMPX a good "buy" for investors aware of the potential pitfalls present at this juncture.
Amprius Technologies specializes in silicon anode technology, which delivers lithium-ion batteries for mobility applications that provide more energy and power and less weight and volume. This technology is used in batteries for drones, high-altitude pseudo satellites, electric vehicles, air transportation, and wearables. AMPX was founded in 2008 and became fully operational in 2010. It later went public in 2023 and is currently based in Fremont, California, focusing on expanding its production capacity and revenues. So, you can think of AMPX as a company with proven technology pivoting towards the early stages of the commercialization phase of its technology.
Today, AMPX technologies are silicon anode and cell chemistries with high energy and power density: up to 500 Watt-hours [Wh/kg] per kilogram. Wh/kg measures the amount of energy the battery stores relative to its weight, which is important because higher energy density can be extremely useful across various applications and products. Increasing energy density can theoretically disrupt current products with energy bottlenecks based on their current battery technology. AMPX's batteries have up to 1,300 Watt-hours per liter [Wh/L], which estimates the power available per volume and further enhances the technology's attractiveness for OEMs. AMPX's batteries can deliver up to 10 times the charge and achieve 80% charge in less than 6 minutes, which is self-evidently a groundbreaking achievement that should eventually have tangible implications on EV manufacturers, wearables, and other battery-powered machinery. This lies at the heart of AMPX's value proposition and investment thesis and is why the silicon battery market is expected to grow significantly until 2028.
Furthermore, AMPX's battery technology is a substantial innovation in lithium-ion batteries due to a silicon nanowire anode structure instead of the graphite framing used in conventional batteries. Silicon can store up to 10 times more lithium ions than graphite, resulting in a higher energy density. However, the problem with silicon charged with lithium is the degradation of battery life due to swelling, which means silicon batteries increase up to 300% in size when used.
The most promising aspect of AMPX's technology is that it resolves this challenge using a silicon nanowire anode that allows this swelling without cracking, excluding the use of inactive materials. By employing this approach, AMPX enhances battery performance without requiring additional materials that do not contribute to the battery's energy storage capabilities. This technology has been proven under military specifications and operates in a wide temperature range from -30°C to 55°C. But more importantly, it showcases that AMPX's batteries can overcome current silicon battery limitations, potentially opening up a significant TAM for its business.
Expanding on this, AMPX delivers two types of silicon anode structures: SiMaxx and SiCore. SiMaxx is composed of 100% silicon without other active anode materials. Its vertical nanowires allow the silicon to expand in volume when charged with lithium ions, preventing fractures due to expansion. The SiCore structure has a rounded design of up to 100% silicon without other active anode materials but can also be mixed with other active materials for greater application flexibility. Both structures enhance battery performance with high lithium storage, generating the highest energy and power in the industry.
AMPX's battery models are designed for applications requiring various sizes and capacities. One model is designed for High-Altitude Pseudo Satellites [HAPS] drones, with dimensions of 5x50x56mm and a capacity of 3700mAh. Another is a battery for Commercial Wearable Bands [CWB], measuring 6x54x65mm with a 5400mAh capacity. A smaller cell for nano Unmanned Aerial Systems [UAS] is in development, with dimensions of 7x15x32mm and a capacity of 725mAh.
AMPX also has prototypes in development, such as a very small battery for wearables, with dimensions of 3x7x53mm and a capacity of 190mAh. Also, a smartwatch battery, larger than the wearable battery prototype, measures 6x28x29mm with a capacity of 1200mAh. Lastly, a large battery is potential for battery electric vehicles (BEVs), which are significantly larger at 5x99x300mm and have a high capacity of 45Ah. The variety of battery models shows the adaptability and expandability of the AMPX technology.
In September 2023, AMPX announced a showcase event for its expanded Fremont, California facility, which included a new production line elevating the generation capability from kilowatt-hours to megawatt-hours. The increase in capacity supports the demands of major customers like Airbus SE (OTCPK:EADSY) and BAE Systems plc (OTCPK:BAESY) and will serve a backlog of new customers in 2024. The facility will produce batteries with high energy density, such as 500 Wh/kg and 1335 Wh/L, and discharge rates as high as 10C. The C-rate measures the rate at which a battery is discharged relative to its maximum capacity. A 10C discharge rate means the battery can supply power at a rate ten times greater than its capacity. This feature is essential for applications that require a lot of energy quickly, for instance, when accelerating a vehicle or taking off in an electric aircraft.
In their latest earnings call on March 21, 2024, AMPX's executives highlighted its 80 issued patents and pending applications and its position as a silicon anode battery technology leader. They also announced increased diversification with 41 total customers by Q4 2023, with secure orders from key sectors like electric aviation. In addition to the Fremont facility, which targets 2MWh capacity by the end of 2024, the company is preparing the Brighton, Colorado site for operation in 2025. AMPX is ready for a significant production increase with the extended Fremont facility and the coming new Brighton installation. Furthermore, AMPX implemented partnerships with a Brazilian's formerly affiliated company to produce SiCore batteries immediately. This partnership demonstrates AMPX's agility in responding to market demands.
Also, in this call, Sandra Walach, AMPX's CFO, noted that the company is pursuing a 45X tax credit to claim 10% of its manufacturing cost and $35 for every kilowatt-hour produced battery capacity. AMPX actively seeks financial incentives to use available credits to support business growth, which I believe will tangibly boost its margins going forward. Then, in March 2024, AMPX announced it had been named to Fast Company's prestigious list of the World's Most Innovative Companies of 2024 in the Energy category. This achievement should enhance AMPX's reputation among OEMs and attract further attention from investors, potential customers, and partners.
From a valuation perspective, AMPX still trades at a relatively small market cap of just $245.3 million. However, its revenues are just as small by comparison, as full-year 2023 revenues came in at just $9.1 million, with operating losses of $36.8 million. This is not unreasonable, as AMPX is ramping up its Freemont facility's production. Still, it shows much speculative value embedded in AMPX's valuation today. After all, the market is pricing future growth rather than its current revenue run rate.
Fortunately for AMPX, its revenues should ramp up relatively quickly by 2025 with its expanded production capabilities. According to Seeking Alpha's dashboard on AMPX, 2025, yearly revenues should reach roughly $69.7 million, which would price AMPX today at a forward P/S ratio of 3.52. This is not an unreasonable valuation multiple by itself, especially in light of its potentially impressive future growth rate, but also compared to its sector median forward P/S ratio of 1.51. For context, AMPX's sector is expected to grow revenues at roughly 6.35%, but the implied revenue growth rate for AMPX is 432.0% YoY in 2025. So, after considering AMPX's stellar future growth rate, its current revenue multiple seems reasonable, if not cheap in my opinion.
The overall silicon battery market further corroborates a promising growth rate forecast CAGR of 48.4% until 2030. So, it's fair to say that AMPX also enjoys long-term secular tailwinds. It is particularly well positioned in its market with over 80 patents on its core technology and cell design of silicon nanowire anodes that address typical limitations associated with this kind of battery.
Moreover, the company's balance sheet shows that AMPX has enough resources to fund its expansion and operations during this commercial ramp-up period. The company holds $45.8 million in cash and no debt, though it does hold some $35.6 million in lease liabilities. I estimate AMPX's latest quarterly cash burn at roughly $10.6 million, which annualized implies a yearly cash burn rate of $42.4 million. I obtained these figures by adding the latest quarterly CFOs and CAPEX and annualizing them. Hence, today's major concern is the implied cash runway of just 1.08 years. I believe this is AMPX's major downside, as it will likely continue to resort to stock dilution soon to finance its expansion. However, it's reasonable to expect that it'll finance these efforts with a mix of debt and equity, and since it holds proven IP with tangible revenues that are expected to compound quickly, raising such funds shouldn't be an issue.
As a whole, I think we can't be bearish on AMPX's underlying business. It has a proven IP, protected with patents, and tangible revenues on the verge of quickly scaling up. Moreover, it's strategically well positioned in a market poised to grow rapidly, representing strong favorable secular tailwinds for the business. At the relatively small market cap of $245.3 million, I believe it's also an attractive M&A target for larger OEMs looking to secure this potential competitive advantage in silicon battery technology. Therefore, I rate AMPX a "buy" as I think that, over the long run, these dynamics will result in significant shareholder value.
However, investing in AMPX depends on factors and dynamics outside management's control. Particularly, there are still some technological risks and uncertainties related to the broader market adoption of silicon anode battery technology. The limitations related to how these types of batteries are not trivial, and although AMPX has some advancements that tackle that, these limitations can still become a major roadblock for adoption beyond niche applications.
Moreover, the battery technology sector is incredibly competitive, and some better-capitalized competitors are also advancing in this space, such as Panasonic Holdings Corporation (OTCPK:PCRFY), Samsung Electronics Co., Ltd. (OTCPK:SSNLF), Ltd., and Tesla, Inc. (TSLA), among others. Also, even AMPX has corporate legal measures such as blank check preferred stock provisions and a staggered board that could hinder M&A efforts to spur or unlock shareholder value. Lastly, dilution and execution risks related to scaling operations remain, and shareholders must be aware of how these risks could play out in uncertain ways that derail the investment thesis. Yet, as a whole, I think AMPX's inherent potential is considerable and justifies these risks.
Overall, through its silicon approach, AMPX is a promising disruptive player in the battery sector. This market is forecasted to grow rapidly at a 48.4% CAGR until 2030, which positions AMPX's business perfectly to benefit from these secular tailwinds. The company is at its initial commercialization stages, and shareholders buying at these levels should benefit from this cocktail of opportunities in the battery space. Despite inherent risks related to AMPX's business, sector, and scaling ambitions, I deem the stock a good "buy" for investors aware of the potential pitfalls present at this juncture.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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