What undergirds this decade’s amazing technologies … a niche player in energy storage … how it becomes a 10X winner
In Saturday’s Digest, my colleague, Luis Hernandez, highlighted seven hypergrowth sectors poised to explode in 2022. The list originates from our hypergrowth expert, Luke Lango.
If you missed it, here are those sectors, counting down to hydrogen, which is Luke’s #1 pick:
- Sports Betting
- Psychedelics
- Autonomous Vehicles
- Robotics/Automation
- Solar
- Electric Vehicles
- Hydrogen
Now, with the exception of sports betting and psychedelics, what’s the commonality?
Yes, they’re all tech. But if we dig deeper, there’s another feature they share…
They all require, or support, a robust energy storage industry.
Autonomous vehicles – which will be electric – will require charging stations. Solar energy requires energy storage units so that we can use its energy at night. Hydrogen will need a storage system. Even robotics/automation will require powering…which we can extrapolate to meaning a robust energy storage industry.
***The bottom-line is that all the jaw-dropping technological advancements we’ll see this decade will be underpinned by a massive energy storage industry
I don’t use the word “massive” lightly.
Here’s Luke with more:
We earnestly believe that the energy storage market – which our research shows could grow by 25X over the next decade – represents the most compelling investment opportunity of the 2020s.
Today, we’re bringing you a small-cap energy storage leader that Luke believes could soar 10X this decade. It’s from Luke’s Friday issue of The Daily 10X Stock Report.
We’ll reveal the stock in a moment. But just as interesting to me as the pick itself is Luke’s approach to energy storage overall – specifically, why putting your money into just one stock isn’t the wisest strategy.
Here he is, explaining:
When you have an investment opportunity this big, you don’t just take one shot at finding a huge winner in the industry.You take multiple shots, because when an industry has this much growth potential, it tends to produce multiple 10X winners.
See: Electric vehicles. We’re still in the early days of that investment megatrend, and it’s already produced multiple 10X winners like Tesla (TSLA), NIO (NIO), and Blink Charging (BLNK).
The energy storage megatrend will be no different.
Throughout the 2020s, this explosive industry will birth multiple 10X winning stock picks.
If your portfolio doesn’t have exposure to this important, high-growth corner of the market, consider the stock we highlight today an option for dipping your toe in the water.
Luke calls this company “one of the more unique energy storage startups in the world today, with a potentially transformative energy storage technology that could reshape this entire industry.”
Let’s jump in.
***Getting in early on this 10X energy storage megatrend
For newer Digest readers, Luke is the analyst behind The Daily 10X, as we call it. His specialty is finding market-leading tech innovators that are pioneering explosive trends, capable of generating 10X returns for investors over the long-term.
The Daily 10X is like nothing else we offer. Luke doesn’t keep a portfolio or provide sell advice. But every day the market is open, he highlights a small cap stock – or in this case, a cryptocurrency – with the potential to grow 1,000%.
It’s a lucrative approach to the markets. To illustrate, in just the past five years, Luke has recommended 17 different 1,000%+ gaining stocks. Most investors never enjoy even one such 10X-winner.
Returning to today’s opportunity, what’s the energy storage leader on Luke’s radar?
Energy Vault, which is going public via a SPAC merger with Novus Capital Corporation II (NXU).
Here’s Luke with the overview:
Energy Vault is an alternative energy storage startup working on unique gravity-based energy storage technologies. That is, whereas most energy storage startups are using batteries to store power, Energy Vault is storing energy through the lifting and dropping of big bricks.The idea sounds odd. But it is based on the same physics principles powering the world’s most common energy storage: pumped hydropower.
In pumped hydropower, the systems pump water from a lower elevation to a higher elevation to store energy, and then deploy that energy by releasing the water from that higher elevation to the lower elevation – i.e. letting gravity takeover.
Energy Vault has designed a similar system, but without water.
Luke explains how this involves huge cranes lifting massive, multi-ton bricks off the ground to store energy. The releasing of those same bricks deploys the energy.
Not quite grasping how this works?
Luke is the first to agree the idea sounds wonky. But an analysis of the technical round-trip efficiency of this method reveals it to be highly-effective.
Back to Luke:
The company recently constructed and operated the world’s first commercial-scale, gravity-based energy storage system of its kind in Switzerland in 2020.
The system registered round-trip efficiency of 75.3%, with a mechanical strength of 8 MPa, a pressing time of 10 minutes, and accuracy of +/- 0.2%.
All of these are close to being market-leading metrics.
***The case “for” and “against” Energy Vault
Let’s begin with Energy Vault’s tailwinds.
From Luke:
Gravity-based energy storage techniques offer tremendous promise in niche applications in the global energy market.
With zero power degradation, these are the “best fit” systems for areas with lower renewable power generation capabilities – i.e. places that go for days without sun or wind.
While these energy storage systems will never become the dominant energy storage tech in the market, they will dominate certain niches of the market.
Per our analysis, Energy Vault is the unrivaled leader in gravity-based energy storage technology.
Beyond this, Luke finds the valuation very attractive. He points out that, relative to other leading energy storage startups, Energy Vault is undervalued at just $1.6 billion.
But what about the warts?
Many investors decide they want to buy a certain stock. Based on this desire, their analysis tends to focus on reasons to justify a purchase rather than an objective analysis of the pros and the cons.
While Luke loves a good investment story, he’s far more interested in what could go wrong. That type of skeptical analysis is how smart investors protect their wealth.
Given this, Luke is quick to point out various headwinds facing Energy Vault:
It appears lithium-ion batteries will dominate short-duration energy storage (0 to 10 hours), while iron flow batteries will dominate long-duration energy storage (10-plus hours).
Energy Vault will have to steal market share from one of those two dominant methods in the coming years in certain niche applications, and doing so could prove difficult.
The size of these systems is prohibitive. The crane is about 300-feet high and cannot be placed anywhere, like a battery. The enormity of these systems will very likely limit their adoption to utility-scale projects.
Luke also notes that if the cost of lithium-ion batteries continues to plummet, it would put pressure on the unit economics of gravity-based storage.
So, factoring all of these pros and cons together, how does Energy Vault become a 10X winner?
***The path to a 1,000% return
Here’s the quick math from Luke…
The entire energy storage market will come in at somewhere north of $100 billion by 2030…
Per his analysis, Luke believes Energy Vault can grab a 5% market share, implying $5 billion in revenues…
Management is targeting 25% EBITDA margins by 2025, and Luke sees that number creeping up towards 30% by 2030, imputing $1.5 billion in EBITDA…
Here’s Luke with the final step:
The whole market is trading around 16X EBITDA. That multiple imputes a long-term enterprise value of $24 billion.
A reminder that Energy Vault’s valuation today comes in at just $1.6 billion. From $1.6 billion to $24 billion would be a 14-bagger.
***A niche pick for a clean energy storage portfolio
We’re very early in this clean energy storage buildout. There’s no way to know which companies will prove to be tomorrow’s market leaders.
As such, taking small positions in a basket of potential winners is a wise approach. And Energy Vault’s niche technology makes it a compelling investment.
Here’s Luke with the final word:
We’re growing very bullish on the clean energy storage market as one of the highest upside investment opportunities for the 2020s.
We’re so bullish on it, that we don’t want to make just “pick” here. We want to have multiple horses in this race, and preferably, we want different types of horses.
Energy Vault is unlike any other leading energy storage company out there, and in its niche of gravity-based energy storage techniques, it’s the unrivaled leader.
This looks like a good addition to any energy storage portfolio.
Have a good evening,
Jeff Remsburg
