Enovix Shares Hit 6-Month High; Long-Term Highs to Follow

Key Points

• Enovix shares are moving higher as the outlook brightens and could rise sharply over the next few weeks.
• Short interest is high in this stock, and a squeeze is likely. 
• Analysts' sentiment has begun to shift, providing a tailwind for the action.

Enovix's NASDAQ: ENVX share price surged in July, reaching a 6-month high early in the month, and longer-term highs are expected to follow. The move is driven by a steadily improving news cycle, which includes ramping up production, robust demand, a surprise buyback authorization, and improved guidance affirming it all. 

The latest news is the guidance update, which improved the revenue outlook by roughly 35% and reduced the expected loss range, citing strong demand in multiple end markets. Revenue is forecasted to be slight, approximately $7.5 million, but this is the first trickle of what will soon become a flood. The forecasts, which the guidance update suggests are too cautious, forecast this company to grow at a hyper 260% pace in F2026, sustain the pace the following year, and a solid triple-digit pace the next two years, growing to over $2 billion in sales by 2035, more than 6000% total growth.

What is Enovix? Enovix designs and manufactures next-generation silicon anode lithium-ion batteries. The batteries have numerous advantages, including durability in high-power environments, energy density, and discharge rates, which make them suitable for a wide range of applications. While EV is the apparent choice, demand for these batteries comes from numerous vectors, including aerospace, EV/AV, IoT, industrial, and consumer products.  

Enovix Share Buyback Authorization Provides Market Support

Enovix's decision to repurchase $60 million in shares may initially appear to be a red flag. The total is far more than it will generate in revenue this year, but the growth outlook and the balance sheet offset the deficiency. Next year’s revenue is sufficient to cover the buybacks; however, the critical factor is that it is on track to generate positive cash flow and profits, setting itself up to sustain balance sheet health and share buybacks long into the future. 

Until then, the balance sheet is healthy enough to return capital, given the revenue and earnings outlook. The highlights at the end of Q1 included sufficient capital to cover the buyback authorization and leave the company in a healthy condition. Debt remains low, and the leverage is manageable; investors might expect to see balance sheet improvements in coming quarters, including increased cash, assets, and equity. 

Analysts' Sentiment Shifts in July, Supporting Price Action

Analyst trends are generally bullish for Enovix, including increasing coverage and firming sentiment. However, the price target reduction in the first half of the year weighed on the price action, opening up the buying opportunity presented in Q2.

The analyst activity in July reverses the trend, including an upgrade and price target increase from TD Cowen. The upgrade is to Hold, versus the broad consensus of Moderate Buy, and the price target is $15, $2 shy of the consensus. However, both are moving in a bullish direction, and consensus forecasts a 25% upside. 

Enovix is a short-squeeze candidate. The stock was nearly 30% short as of the mid-June report, more than sufficient for a robust price surge driven by short-covering. The price action in early July doesn’t reflect a squeeze yet, but is bullish, showing support at a critical level and setting a new high. The question now is whether the stock will continue to advance or move sideways near its current levels until the Q2 final report is released. It is due by the end of July and is a likely catalyst for this market. 

The caveat for traders and investors is that this stock has been moving sideways within a choppy range for years. Numerous points of potential resistance can not only induce volatility to the action but also cap gains and lead to price corrections in between earnings cycles. The critical resistance targets are near $16, $18.50, and $20.50.