Wunderlich Coverage on Ener1 Ignores Key Partnerships

Last week, Wunderlich Securities initiated coverage on Ener1, Inc. (HEV) with a hold rating. HEV designs, develops, and manufactures rechargeable lithium-ion batteries and battery systems for energy storage (from Yahoo! Finance profile). These batteries are used in electric vehicles. Eric Savtiz’s Tech Trader Daily covered the coverage.

Wunderlich’s main points are:

  1. HEV is a very risky investment given the high cost of the technology infrastructure to support lithium ion batteries and the large cost reductions required to gain significant market penetration.
  2. HEV is a new market entrant competing against an established and entrenched competitor in Johnson Controls (JCI): “…only Johnson Controls (JCI) has a record of serving the auto industry or has the infrastructure in place to service it.”

OK. Point taken on the costs. But, one small problem with the second point: HEV also has an established record of serving the automotive industry. In fact, you can read about it from HEV’s website and browsing the web for a few minutes:

“EnerDel was formed in 2004 through a collaboration of industry leaders: Ener1, Delphi Corporation and Itochu Corporation.”

General Motors created Delphi in 1994. Delphi just happens to be a major player in the automotive components industry with over 140,000 employees, and 100 years of automotive history. This is quite comparable to JCI’s 130,000 employees and origins dating back to 1885. Itochu started 150 years ago in Japan as a linen trader and has grown into a major industrial conglomerate. In 1971, it was involved in contract negotiations between General Motors and Isuzu Motors. Itochu’s Energy, Metals, and Minerals company spans the globe from the Caspian Sea to Australia to Brazil. In other words, HEV could do a lot worse than its present partners.

Moreover, HEV is the biggest shareholder in, and a close partner with, Think, a company that has manufactured electric vehicles in Europe for 19 years. Ford Motor company was even a major investor.

While HEV is not guaranteed to survive the rigors of the alternative energy industry, it is not the overwhelmed “johnny-come-lately” as Wunderlich appears to claim.

(Interesting side note – at the same time of this coverage, HEV appointed Bruce Curtis, former Vice President of Program Development at First Solar (FSLR), global President HEV’s grid storage business.)

Given Friday’s 11% pop, HEV is already just 8% away from Wunderlich’s $3.50 price target. It is also trading just above its all-time lows set less than a year after going public in 2008.


Weekly chart of HEV's trials and tribulations as a publicly traded company
Weekly chart of HEV's trials and tribulations as a publicly traded company

*Chart created using TeleChart:

{Thanks again to a friend of mine for bringing this story to my attention}

Be careful out there!

Full disclosure: no positions

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