Shares of Enovix Corporation (US:ENVX) soared 11% in Friday’s trading session following a bullish update from the company, extending the stock’s 2023 year-to-date return to 25%.

The advanced silicon battery company announced that it had already achieved its second-quarter forecast of manufacturing 18,000 units from its Fab1 location in Fremont, California, surpassing expectations with more than two weeks remaining in the quarter.

The company’s energy density value proposition and materials-agnostic approach provide a competitive edge, unlocking premium pricing and margin potential. Enovix’s higher energy density batteries enable customers to leverage advancements in other areas, such as processors, cameras, and displays, without compromising battery life.

With enhancements in throughput and improvements in machine uptime, President and CEO Dr. Raj Talluri said management remains confident in the company’s ability to produce 180,000 cells for customers in 2023 from Fab1, supporting qualification activities and customer products.

Additionally, the company plans to start high-volume manufacturing at its Fab2 location in Penang, Malaysia, next year, with a capacity to produce over nine million batteries annually when fully ramped.

Even before Friday’s big jump, ENVX stock has been outpacing peers. The shares are up more than 40% in the last six months, while the Invesco WilderHill Clean Energy ETF (US:PBW) is down less than 1% in the same period. That 76-stock exchange-traded fund reduced its allocation of Enovix stock by about 93,000 shares this quarter, data compiled by Fintel shows.

Smooth Execution

The positive news was met with a favorable response from Canaccord Genuity analyst George Gianarikas, who praised the company’s smooth execution under the new management team.

Gianarikas maintained his ‘buy’ rating on the stock and reiterated that shares could rise to $20 over the next year. He emphasized Enovix’s groundbreaking battery technology, its architecture-first approach, and the potential for real-world products powered by Enovix batteries to hit the market this year.

As the company continues to meet or exceed its targets and expectations, the analyst said his firm becomes more confident that Enovix can scale its groundbreaking battery technology.

Fintel’s consensus target price of $29.95 suggests the broader market thinks the stock price could double over the next year.

It was only last October in 2022 when shares were back trading around the $20 range before beginning its descent along with broader equity markets.

Options Action

Enovix’s strong performance and achievement of its production goals created a burst of options activity ahead of the three-day Juneteenth weekend. Fintel’s options data on the stock highlighted total options contract volume of 72,811, with call volume significantly outweighing put volume — a bullish indicator.

In total there was $1.06 million of net long premium purchased, outstriping the usual volume flow.

Enovix’s steady progress and adherence to customer needs have allowed it to maintain a strong competitive advantage. By offering batteries with 100% active silicon content, Enovix stays ahead of peers who may resort to adding lower amounts of silicon to batteries.

The company’s close collaboration with customers and ongoing sampling activities further enhance its understanding of various customer priorities, enabling Enovix to tailor its products accordingly.

Margin Opportunities

Looking ahead, Enovix is focused on optimizing margins and flexing its capacity ramp. The company is controlling production levels to align with strong gross margin opportunities in different product segments.

The earnings potential for the company is significant, however we will need to see what level of profitability the battery producer can derive from its sales and if it will be enough to support the $2.5 billion current market capitalization of the stock.

Short Squeeze Potential

Fintel’s short interest data on Enovix highlights that the stock could be ripe for a short squeeze if momentum was to see another boost.

There are currently 31.32 million shares currently shorted according to Nasdaq data with 4.56 days to cover. Short interest equates to around 23.70% of the total float, however the availability of shares remains pretty strong around 2.9 million shares.

In total, the quant model gives ENVX a short squeeze score of 75.56, ranking the company in 736th spot, or in the top 16% when screened against 4,601 other potential stock candidates.

With its innovative energy density value proposition and commitment to operational excellence, Enovix is well-positioned to lead the industry in advanced next-generation batteries that power the technologies of the future.

This article originally appeared on Fintel

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