Solid Power Inc Backed by Ford & BMW

Investors seem to be afraid of the Federal Reserve's interest rate hikes. The S&P 500 is down by roughly six percent since data came out that U.S. inflation remains above eight percent. This suggests the Federal Reserve will continue its interest rate hikes to get a handle on inflation.

Higher interest rates are, for the most part, bad for the stock market. It costs more money to borrow, which can weigh down consumer spending, which dampens corporate profits.

In light of this, it might make sense for investors to look at companies that are less concerned about what’s currently happening with Wall Street and the broader economy and are more focused on taking technology from the development stage to the full-production stage.

Solid Power Inc (NASDAQ:SLDP) has been developing all-solid-state rechargeable battery cell technology, primarily for the electric vehicle (EV) market. (Source: “Investor Deck: December 2021,” Solid Power Inc, last accessed October 3, 2022.)

The company’s next-generation technology replaces the flammable liquid or gel electrolyte in traditional lithium-ion battery cells with a proprietary sulfide-based solid electrolyte.

What’s the big deal about that?

Solid-state batteries are designed to be safer, generate more energy, be more stable at higher temperatures, and be less expensive than the best currently available lithium-ion batteries. Despite the big improvements, Solid Power Inc’s products can be manufactured using traditional processes for lithium-ion batteries.

In comparison, the lithium-ion EV batteries currently on the market have limited driving range, their cells must be kept cool, and they're flammable. They're also expensive; complex battery packs are the single most expensive part of an EV.

Solid Power says its propriety technology has “the potential to revolutionize future mobile power markets.” (Source: "About," Solid Power Inc, last accessed October 3, 2022.)

Admittedly, every business says their product or service is going to revolutionize whichever industry they’re in. But Solid Power Inc’s technology is revolutionary enough to have attracted the attention of two of the biggest automakers: Ford Motor Company (NYSE:F) and Bayerische Motoren Werke (ETR:BMW, OTCMKTS:BMWYY), better known as BMW.

BMW first invested in Solid Power Inc in 2017, and Ford jumped in with its own investment in 2019.

In May 2021, Solid Power announced that it had closed on a new round of investments worth $130.0 million. Those investments were led by Ford, BMW, and Volta Energy Technologies. (Source: “BMW and Ford Invest in Solid Power to Secure All Solid-State Batteries for Future Electric Vehicles,” Solid Power Inc, May 3, 2021.)

In June 2022, Solid Power announced that it had started pilot production of its solid-state batteries. Management expects mass production to begin as early as 2024. (Source: “Solid Power Announces Installation of EV Cell Pilot Line,” Solid Power Inc, June 6, 2022.)

When running at full capacity, Solid Power’s production line is expected to be capable of manufacturing 300 EV battery cells per week (approximately 15,000 per year), with the majority of those cells to be tested by Ford and BMW for automotive qualification.

Solid Power Inc is looking to increase its production capacity within the next four years to 6,000 metric tons, which would be able to juice 100,000 EVs.

Management Reports Solid Q2 Results & Increases Revenue Guidance

Despite being a development-stage company, Solid Power has been generating revenue. In the second quarter, its revenue was $2.6 million, up from $600,000 in the second quarter of 2021. Its year-to-date revenue was $4.8 million, up from $1.0 million in the first half of 2021. (Source: “Solid Power, Inc. Announces Second Quarter 2022 Financial Results,” Solid Power Inc, August 9, 2022.)

The company reported an operating loss of $14.7 million. That wasn't a total surprise, since it’s still experiencing growing pains. With total liquidity of $534.2 million, Solid Power has more than enough cash to get it to the production stage.

Doug Campbell, Solid Power Inc's CEO, noted, "First half results reflect continued solid execution by our team as we continue to position the company for long-term success." (Source: Ibid.)

He continued, "With the recent installation of the EV cell pilot line, we now have the operational capabilities needed to produce EV-scale cells, which is a critical step towards initiating the formal automotive qualification process.”

After delivering strong first-half-year revenue results, Solid Power expects its full-year 2022 revenue to exceed the high end of its previous guidance range, which was $3.0 to $5.0 million.

Solid Power Inc reiterated its outlook for cash investment between $150.0 and $170.0 million in full-year 2022. It also expects to have total combined cash, cash equivalents, marketable securities, and long-term investments between $420.0 and $440.0 million at the end of this year.

There are many great things going on at Solid Power Inc, but its share price probably won't reflect that until the company announces positive test results from Ford and BMW (hopefully in 2023). As of this writing, Solid Power stock is down by 32% in 2022, but analysts think the stock could soar by as much as 118% over the next 12 months.

That’s just the beginning. Solid Power stock could go even higher over the next two years when the company announces EV battery contracts.

Chart courtesy of StockCharts.com

Analyst Take

Although Solid Power Inc is a development-stage EV company, it’s just about to turn the corner on production. It recently initiated a pilot program for its proprietary all-solid-state rechargeable battery cell technology. Full-scale production is slated for as early as 2024.

In the meantime, the company will be sending its pilot-stage batteries to its heavy backers, Ford and BMW, for testing. I would expect positive test results to energize SLDP stock in 2023.