Should You Buy Solid Power on the Dip? Solid Power (SLDP) made its stock market debut in December of 2021 as the only publicly traded pure-play solid-state battery manufacturer for electric vehicles. However, the stock has declined more...
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Solid Power (SLDP) made its stock market debut in December of 2021 as the only publicly traded pure-play solid-state battery manufacturer for electric vehicles. However, the stock has declined more than 45% since due to its bleak financials amid an extended market correction. Given the rising demand for EVs worldwide, will SLDP be able to rebound soon? Read more below….
Solid Power, Inc. (SLDP) is a pure-play solid-state battery cell manufacturer. The company's products have applications in electric vehicles. It went public through a reverse merger with blank check company Decarbonization Plus Acquisition Corporation III on December 9, 2021, raising $542.90 million in gross proceeds. As of December 9, 2021, SLDP is the only pure-play solid-state battery company to trade on the public markets.
Regarding this, SLDP Co-founder and CEO Doug Campbell said, "Solid Power has spent the last ten years developing all-solid-state battery technology that is designed to deliver the increased performance demanded by both automakers and consumers. We are excited to have completed our business combination with DCRC and we are looking forward to our future as the only pure-play solid-state company trading on the public markets."
However, the company stated in a press release that its capital-light business model through vehicle integration is expected to occur in 2026. Shares of SLDP have slumped 45.8% since their Nasdaq listing. In addition, the stock plummeted 19.3% year-to-date and 8.3% over the past five days. The SLDP's bleak financials and growth prospects and pessimistic broader market sentiment caused the stock to lose momentum since its public debut.
Here's what could shape SLDP's performance in the near term:
Bleak Financials
SLDP's revenues increased 357.5% year-over-year to $2.20 million in the fiscal first quarter ended March 31, 2022. However, the company's total operating expenses increased 183% from the same period last year to $13.50 million. Consequently, the operating loss widened 163.5% from the prior-year quarter to $11.31 million. Pre-tax loss worsened 44.1% from the year-ago value to $10.37 million, while net loss widened 44.9% year-over-year to $10.34 million. Loss per share stood at $0.06.
In addition, net cash and cash equivalents used by operating activities increased 294.4% from the same period last year to $14.37 million. Cash and cash equivalents balance stood at $450.41 million as of March 31, 2022, compared to the $513.45 million balance as of December 31, 2021.
Premium Valuation
SLDP's trailing-12-month P/E multiple of 112.63 is 777.4% higher than the industry average of 12.84. In addition, the stock's forward EV/Sales multiple of 173.94 is significantly higher than the industry average of 1.11.
Its trailing-12-month Price/Book ratio of 2.36 is 7.2% higher than the industry average of 2.20. Moreover, SLDP is currently trading 299.68 times its forward Sales, 31,298.2% higher than the industry average of 0.95.
POWR Ratings Reflect Bleak Prospects
SLDP has an overall rating of D, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
SLDP has a grade of D for Value and Quality. The stock's stretched valuation compared to its peers justifies the Quality grade. In addition, the company's trailing-12-month gross profit margin and ROTC are negative 3.64% and 7.4%, respectively, in sync with the Quality grade.
Of the 93 stocks in the Industrial – Equipment group, SLDP is ranked #75.
Beyond what I've stated above, view SLDP ratings for Growth, Momentum, Sentiment, and Stability here.
Bottom Line
SLDP is an industry-leading developer of solid-state battery cells for EVs. However, given the global supply chain constraints and lithium supply shortage, SLDP's operating expenses have increased substantially. As the adverse macroeconomic conditions persist, the company is expected to face severe production and cost headwinds in the near term. Thus, the stock is best avoided now.
How Does Solid Power (SLDP) Stack Up Against its Peers?
While SLDP has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Standex International Corporation (SXI), Preformed Line Products Company (PLPC), and Belden Inc. (BDC), which have an A (Strong Buy) rating.
SLDP shares closed at $6.90 on Friday, down $-0.15 (-2.13%). Year-to-date, SLDP has declined -21.05%, versus a -17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do's and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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