Shares of Aspen Aerogels (ASPN 3.44%) rocketed 48.1% this week through Thursday's trading, according to data from S&P Global Market Intelligence.
Aspen's first-quarter earnings report was the catalyst for this week's massive rally, proving that the company's aerogel barrier insulation technology is taking off with a number of major electric vehicle (EV) manufacturers.
NYSE: ASPN
Key Data Points
Growth of 107%
In the quarter, Aspen reported revenue of $94.5 million, up 107% year over year and crushing expectations by $19.1 million. Both adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and operating income flipped from losses a year ago to positive territory this year. Net loss per share, while negative at $0.02, nevertheless beat expectations by $0.09. The company also raised its full-year guidance from $350 million to $380 million in revenue, and from $30 million to $55 million in EBITDA.
The company has two divisions: energy industrial, and thermal barriers. While the energy industrial segment was actually down 14%, this was due entirely to supply constraints. Management still sees 17% growth over the course of this year.
But the thermal barrier segment is clearly the growth juggernaut, up a whopping 459%, and now making up about two-thirds of the company's revenue. Aspen's thermal barrier technology allows for denser and safer EV batteries, extending the range of vehicles. Aspen began selling its solution in 2021, and has grown sales from just $7 million that year to $110 million in 2023 and an estimated $230 million this year. The company has begun shipping its solution to General Motors and Toyota Motor, with multiyear production contracts with Scania and Audi (both subsidiaries of Volkswagen Group), and Automotive Cells Company, a battery-cell joint venture between Stellantis N.V., Saft (a TotalEnergies subsidiary), and Mercedes-Benz.
How high can Aspen fly?
Management says it now has the assets and supply agreements to reach $650 million in revenue at 25% adjusted EBITDA margins, or around $163 million in EBITDA. Aspen's market cap has soared to a little over $1.8 billion after this week's rally, allowing for a valuation of a little over 11 times potential future EBITDA.
While not overly expensive, the company will have to show the potential for growth momentum beyond that future target to keep the stock moving higher. However, it appears that its thermal-barrier solution has serious credit with major EV manufacturers, making Aspen a hot growth stock to watch.
