Smart Glass Integration In Electric Vehicles Will Fuel Lasting Demand

Key Takeaways

• Broad industry diversification, strong OEM partnerships, and innovative smart glass tech position Gauzy for stable growth and reduced revenue volatility.
  
• Increased production capacity, operational efficiencies, and improved cash flow management support higher profitability and readiness for sustained market expansion.
  
• Heavy reliance on volatile revenue streams, large clients, and debt-driven liquidity exposes the company to significant financial uncertainty and potential margin pressures.

Catalysts

An integrated light and vision control company, develops, manufactures, and supplies vision and light control technologies in Israel, the United States, France, rest of Europe, Asia, and internationally.

• The company's record order backlog of $43 million to be shipped in 2025, driven by strong demand from OEMs like Yutong and General Motors, provides high visibility into near-term revenue growth and supports guidance for a 30%+ increase in full-year revenues.
  
• Widespread adoption of Gauzy's proprietary smart glass technologies in electric vehicles, high-end automotive platforms (Cadillac, Ferrari, McLaren, Mercedes-Benz), and marine applications positions the company to capitalize on accelerating consumer and regulatory demand for sustainability and energy efficiency, suggesting durable top-line expansion opportunities.
  
• Launch of innovative prefabricated smart glass stacks, along with expanded production capacity capable of supporting more than double the current run rate, enables scale benefits and operational leverage, improving gross margins as production volume increases.
  
• Diversification across automotive, marine, architecture, and aeronautics segments, alongside expanding Tier 1 and OEM relationships, de-risks revenue streams, drives recurring orders, and is likely to lessen earnings volatility over time.
  
• Operational restructuring, centralized supply chain management, and 80% invoice factoring should improve working capital efficiency and help quickly convert sales to cash, supporting net margin improvement as the company targets EBITDA and cash flow positivity in 2025.

Gauzy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gauzy's revenue will grow by 49.7% annually over the next 3 years.
• Analysts are not forecasting that Gauzy will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Gauzy's profit margin will increase from -39.6% to the average US Electronic industry of 9.0% in 3 years.
• If Gauzy's profit margin were to converge on the industry average, you could expect earnings to reach $29.1 million (and earnings per share of $1.61) by about August 2028, up from $-38.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.6x on those 2028 earnings, up from -3.0x today. This future PE is lower than the current PE for the US Electronic industry at 24.2x.
• Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.31%, as per the Simply Wall St company report.

Gauzy Future Earnings Per Share Growth

Risks

• Persistent revenue volatility due to shipment timing, especially in the Aeronautics division, creates uncertainty in achieving annual growth targets and introduces risks of earnings swings if orders are delayed or cancelled.
  
• Execution risk around the company's aggressive second-half ramp-delivering 70% of annual revenue in two quarters, including quarters significantly exceeding any prior delivery run-rate-could lead to revenue underperformance and compressed margins if operational bottlenecks or customer delays arise.
  
• Heavy reliance on large clients, such as Yutong and major Tier 1s in Aero and Automotive, concentrates revenue exposure; loss or delay from a small number of high-value clients could materially impact revenue and cash flow visibility.
  
• Elevated operational expenses and continued high R&D requirements, combined with an already negative EBITDA year-to-date, suggest that even modest revenue shortfalls or unanticipated cost overruns could further prolong negative net margins or trigger the need for dilutive financing.
  
• High dependence on short-term debt, factoring (80% of business), and undrawn credit lines instead of positive operating cash flows to meet liquidity needs poses risks; tighter global monetary policy, costlier refinancing, or a slowdown in receivables turnover could restrict working capital, raising the risk of cash flow crunch or increased interest costs.

Valuation

• The analysts have a consensus price target of $11.0 for Gauzy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $13.0, and the most bearish reporting a price target of just $10.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $324.5 million, earnings will come to $29.1 million, and it would be trading on a PE ratio of 9.6x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $6.14, the analyst price target of $11.0 is 44.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.