TheChek News Flow

Two weeks ago we marveled at the fact that eight rounds topped $100 million and amazingly, here we are again. It seems like investors are all-in on big rounds again — at least for the last three weeks or so. One round was even worth a reported $1 billion.

Once again, those big, big rounds also ran the gamut from autonomous trucking to AI, and from fintech to batteries. It may not be 2021, but these last few weeks make us wonder.

1. Stack AV, $1B, autonomous driving: Brand-new self-driving, commercial trucking startup Stack AV leads the way in what was a big week. The company was founded by the same folks behind autonomous vehicle startup Argo AI — which was shuttered last year — and just like their previous company, they have brought out big-name investors with cash. Bloomberg reported SoftBank Group is backing the new venture with more than $1 billion. The round is the third-largest ever for a Pittsburgh-based startup — per Crunchbase data — behind only two of Argo AI’s rounds.

2. Ascend Elements, $460M, batteries: Just like last week, we’re talking about EV batteries. A week ago, it was Houston-based battery recycling startup Redwood Materials snagging a massive $1 billion-plus round. This week, it’s Ascend Elements snapping up a $460 million Series D. The Westborough, Massachusetts-based startup is a manufacturer of sustainable battery materials for EVs. The round was led by Decarbonization Partners — a partnership between BlackRock and Temasek focusing on companies in the decarbonization space — Temasek and Qatar Investment Authority. Founded in 2015, the company has now raised $1.5 billion.

3. Nimbus Therapeutics, $210M, biotech: It was just about a year ago that Cambridge, Massachusetts-based Nimbus Therapeutics made this list, and now it’s back. The clinical-stage medicine developer is back again, collecting a $210 million round co-led by new investor GV (Google Ventures) and existing investors SR One and Atlas Venture. In March, Nimbus sold a still-experimental psoriasis drug to Takeda in a deal that could be worth as much as $6 billion. Founded in 2009, the company has raised $637 million, according to Crunchbase data.

4. Imbue, $200M, artificial intelligence: Research lab Imbue is the first AI startup to make the list this week, nabbing a massive $200 million Series B that values the AI research lab at $1 billion. The new round included participation from Astera Institute, Nvidia, Cruise CEO Kyle Vogt, Notion co-founder Simon Last, and others. The San Francisco-based startup, formerly called Generally Intelligent, trains foundation models optimized for “reasoning,” which the company is first applying to develop AI agents that can code. The company says its goal is to enable anyone to build custom AI agents. Founded in 2021, the startup has raised $220 million to date, per Crunchbase.

5. PayJoy, $150M, fintech: San Francisco-based Payjoy locked up a $360 million capital raise this week that was a mix of $150 million in equity and $210 million in debt. The round was led by Warburg Pincus. Payjoy helps underserved people in emerging markets acquire smartphones and access financial systems for loans. Its smartphone-based finance tech has provided more than $2 billion of credit to over 8 million customers in Mexico, South Africa and South and Latin America. Founded in 2015, the company has raised more than $407 million, per Crunchbase.

6. Boston Metal, $112M, cleantech: Boston Metal announced it had closed its Series C fundraising, with $262 million. That comes after it had previously announced $120 million of the Series C in January and then an additional $20 million round in May — so we are saying the close is another $112 million. No lead investors were announced. The startup is creating equipment that is able to take heavy greenhouse gas emissions out of steel production. Founded in 2012, the company has raised nearly $333 million, per Crunchbase.

7. D-Matrix, $110M, artificial intelligence: Santa Clara, California-based chip designer D-Matrix closed a $110 million Series B led by Singapore-based Temasek. D-Matrix, founded in 2019, has raised $154 million, per Crunchbase.

8. Inceptive, $100M, biotech: Palo Alto, California-based startup Inceptive raised $100 million in a new funding round led by Nvidia‘s NVentures and Andreessen Horowitz. The company aims to use artificial intelligence to discover vaccines and therapeutics. Founded in 2021, the company has raised $120 million, per Crunchbase.

9. Star Therapeutics, $90M, biotech: South San Francisco, California-based biotech startup Star Therapeutics locked up a $90 million Series C led by Sofinnova Investments. Founded in 2018, Star Therapeutics says it has raised more than $190 million.

10. (tied) Certa, $35M, enterprise software: San Francisco-based third-party management platform Certa raised a $35 million Series B led by Fin Capital, and Vertex Ventures. Founded in 2019, Certa has raised $50 million, per the company.

10. (tied) Tentarix Biotherapeutics, $35M, biotech: San Diego-based biotech startup Tentarix Biotherapeutics raised a $35 million Series B led by Amplitude Venture Capital. Founded in 2020, the company has raised $85 million, per Crunchbase.

Solar panels are spreading across the globe at a record pace, fueled by tax breaks and ambitious climate goals. The U.S. is installing panels fast, too—so many that solar power is expected this year to account for more than half of new electricity capacity for the first time ever. But solar stocks haven’t come along for the ride. Weakness in some key product areas, including residential rooftop systems, has sunk several stocks in the industry.

None has fallen from grace quite as hard as Enphase Energy (ticker ENPH), which entered the year on a six-year winning streak that included two years when the stock more than quintupled. It’s down 54% this year.

Enphase makes key components for the residential market, which is still growing but faces new challenges. High interest rates and more-stringent rules for solar panels in California have scared off potential customers and led to uncertainty in the industry.

Enphase issued a weak third-quarter sales forecast, causing the stock price to collapse so fast that it now trades at 21 times its expected earnings over the next year, the lowest level since the depths of the pandemic. A stock that normally trades at double the price/earnings valuation of the broader market is now getting just a 10% premium.

The selloff looks too steep. Enphase remains a crucial supplier of solar equipment in the U.S. and elsewhere, with a network of installers and distributors around the world. Its earnings are expected to grow 10% this year to $5.07 per share, and more than 30% in each of the following two years, hitting $8.79 in 2025.

Unlike solar peers, Enphase is solidly profitable, so it doesn’t need to tap increasingly expensive debt markets to fuel its growth. In fact, the company has more cash than debt on its balance sheet and announced a $1 billion buyback plan in July.

Company insiders, who have a history of selling shares, have lately been buying them up. Evercore analyst James West thinks the stock can climb back to $220, up more than 80% from its recent $120. He values the shares at 24.5 times his estimate for 2025 earnings per share of $9, a tech-like multiple that he says is more in line with its growth prospects. “I think there’s going to be a rebound here,” he says.

Enphase, based in Fremont, Calif., was founded in 2006, a time when U.S. solar manufacturing was on the precipice of a steep decline. China had begun investing heavily in solar panel development, grabbing market share from the U.S. and other countries. Enphase was able to avoid the fate of some other solar players because it doesn’t make the panels themselves, a business dominated by Chinese firms that have continually cut prices.

Instead, Enphase builds inverters, which are high-tech devices that convert the direct current produced by solar panels into the alternating current used in homes. Enphase’s so-called microinverters operate differently from products made by competitors. They’re placed directly against the solar panels, allowing them to better transmit data and more efficiently adjust power levels to maximize the system’s output. The products have gained such a following among installers and distributors that the company’s sales have doubled roughly every two years.

The company entered 2023 in strong shape, after sales rose 69% in 2022. But conditions quickly soured. High interest rates have caused consumers throughout the U.S. to delay large capital purchases like solar panels. And in California, the state with the most residential solar panels installed, new rules have made it less lucrative to transition to solar.

As the market slowed, Enphase’s inventory swelled. In the current quarter, it expects sales to fall about 20% sequentially. The stock sold off sharply after that guidance was announced.

CEO Badri Kothandaraman has a plan to bring Enphase out of its doldrums, and he expects the third quarter to represent a bottom. For one thing, he tells Barron’s, the company is expanding quickly outside the U.S., particularly in Europe. The war in Ukraine has sped up the energy transition in Europe, with homeowners quickly adding solar panels to wean themselves off of pricey natural gas.

Kothandaraman thinks the total market opportunity in Europe—where energy security and environmental goals have become higher priorities—is twice as big as the U.S. market. Tapping into that growth, and increasing solar adoption elsewhere, should balance Enphase’s revenue mix in the years ahead. In 2022, the U.S. accounted for 76% of its revenue. Ideally, its sales will eventually be split evenly three ways among Europe, North America, and the rest of the world, Kothandaraman says.

Enphase has also expanded its product offerings beyond inverters; 10% to 15% of its sales are from battery packs that allow homeowners to better manage their power needs or disconnect from the grid. The company also offers electric-vehicle chargers, and an app that lets homeowners monitor their systems. West says Enphase’s deep existing relationships with solar installers should give the company a leg up in selling those products.

The longer-term opportunity in U.S. rooftop solar is still large, particularly once interest rates deflate. After a 3% drop in 2024 due to the lagging effect of the change in California rules, rooftop solar capacity should grow 8% a year on average from 2025 to 2028, says energy research firm Wood Mackenzie.

As Americans embrace the electrification of their homes—solar panels, electric cars, heat pumps, and more—Enphase is well positioned to become a central player. Investors might want to plug in now.

UBS bought while the blood was flowing at crosstown rival Credit Suisse in March and bagged an enormous payday. Or did it?

The stolid Swiss institution, an original gnome of Zurich, posted the biggest quarterly profit in world banking history, by a long way, for the second quarter: $29 billion. Shares rose 2.5%, bringing their gain since the deal was announced to more than 40%.

That doesn’t mean UBS Group (ticker: UBS) actually earned anything.

Virtually all the black ink came from “negative good will” on the Credit Suisse acquisition. That is to say UBS paid about $3 billion for Credit Suisse assets that it now reckons are worth $32 billion. Credit Suisse was just a big mess, not a black hole as panicked shareholders, depositors and Swiss regulators feared.

A mess it remains, though, which UBS needs to clean up before the combined group can reliably make money. “The profit number tells us that UBS did not really find any toxic assets on Credit Suisse’s balance sheet,” says Johann Scholtz, an analyst covering European banks at Morningstar . “Management’s artwork starts now.”

Credit Suisse is still losing $2 billion every quarter, estimates Andreas Venditti, head of banks research at Bank Vontobel. The gaping wound is its investment bank, where revenue plummeted 78% year-over-year in the latest results, costs just 15%.

UBS CEO Sergio Ermotti aims to slash head count commensurately. But firing investment bankers is apparently expensive, too. UBS has earmarked $10 billion for “restructuring expenses,” Scholtz says.

Ermotti will try to cut around pieces of the investment bank that are thriving, like the U.S. leveraged finance practice.

UBS also added $4.5 billion in litigation provisions, preparing for the avalanche of lawsuits that followed Credit Suisse’s demise.

The good news is that Credit Suisse’s wealth management business, the likely reason UBS wanted it in the first place, looks to be stabilizing.

The division bled a quarter of its assets, some $200 billion, between October and May, as rich clients and relationship managers jumped ship, Venditti says. Flows for the past three months turned slightly positive.

UBS boasts a well-regarded management with deep restructuring experience. Ermotti rescued UBS itself from dire straits after taking the helm in 2011, shrinking a deadweight investment bank and doubling down on private banking. UBS brought him out of retirement in April to repeat the trick with Credit Suisse.

“Ermotti and his team have pretty much done this before,” Scholtz says. “Their strategy is absolutely sound.”

Analysts are divided on whether UBS stock has further to run. Scholtz has downgraded to three stars, Morningstar’s equivalent of Hold. He prefers more retail-oriented European banks like Netherlands-based ING Groep (ING) or Lloyds Banking Group (LYG) in the U.K., whose interest income is burgeoning as rates rise.

Gildas Surry, a portfolio manager at Axiom Alternative Investments, is “very constructive” on UBS. He likes the acquisition’s synergies in Swiss banking and wealth management, and a conservative approach to valuing Credit Suisse’s legacy assets. “The new combined franchise will be driven by massively positive operating leverage,” he says.

As an act of public-private crisis management, the Credit Suisse rescue looks like a ringing success. UBS waived a CHF 9 billion ($10.1 billion) loss backstop from the Swiss government last month. It has reduced job-loss estimates within Switzerland from 10,000 to 3,000.

Whether the combined bank becomes a humming profit machine servicing the world’s wealthy remains to be seen.

Utility stocks keep getting slammed this year. That’s leaving investors with opportunities—such as the cheap Avista .

The Utilities Select Sector SPDR exchange-traded fund (ticker: XLU), down 12% during the past 12 months, has fallen out of favor with investors this year. First, they were dumped for being safe stocks as investors abandoned recession fears and embraced riskier fare. Higher rates also made utilities’ dividend yields less attractive. More recently, wildfires in Hawaii and elsewhere have raised the possibility of legal liabilities for utility companies, another pressure point on their shares.

The selling has gotten out of hand. The Utilities ETF trades for less than 16 times 12-month forward earnings, down from around 20.41 one year ago and its lowest since April 2020. It also trades at a discount to the S&P 500 index, when it typically trades at a premium. Utilities don’t get much cheaper than that.

Concerns about utilities are overblown, and their earnings could be much stronger than expected. The companies are adding clean-energy power plants faster than they’re retiring old ones. That allows them to grow their “rate base,” a boon for profits because states typically allow them to earn a fixed return on the equity of those assets.

In other words, as assets grow, so do earnings.

You can’t go wrong with the Utilities ETF, which spreads the risk among 30 stocks and charges a 0.1% management fee. But for investors looking for a single stock, Avista (AVA), down more than 25% this year, is particularly cheap. It trades for about 13.7 times earnings, its lowest multiple in more than 10 years.

There are a few factors holding back the stock—factors that should start reversing soon. For the past few years, the company was less aggressive in requesting rate base increases as it sought to sell itself to Canadian utility Hydro One (H.Canada). Regulators denied the deal, and a stand-alone Avista, which operates in Washington, Idaho, and Oregon, has some catching up to do. Analysts expect total assets to grow a mere 3% this year to just under $7.7 billion, with return on equity creeping higher to 7.1%, though that’s still under the 10.3% seen in 2019.