Aspen Aerogels - 1.5x Sales & 89% Revenue Growth

Is it a buy?

Dear investors👋

This article is on Aspen Aerogels, a US leader operating in the sustainability and electrification solutions market. Despite some volatility, the end market they operate in is growing rapidly. ASPN are in a position to weather the storm by leaning into their energy industrials segment, and maintaining a very healthy balance sheet that will get them to a period where they can play offense when the time is right.

Company: Aspen Aerogels

Ticker: ASPN

Current Price: $7.55

All time high: $63.50

% drawdown: 53.7%

---

Aspen Aerogels Introduction (ASPN)

---

ASPN is a really interesting company with huge potential, but a boat load of challenges. They have created an aerogel technology that has quickly become one of the best insulating materials in the energy industrial, sustainable insulation, and electric vehicle markets.

The company began by manufacturing and supplying the energy industrial market (refineries, petrochemicals facilities, and turbine systems), however now they have developed into a mix of the above and EV and energy storage markets after they launched their PyroThin product.

This PyroThin product is a thin, and flexible, thermal barrier designed to impede the spread of thermal runaway across lithium-ion batteries found in EVs. A thermal runaway is basically an uncontrolled increase in temperature within a system that leads to eventual failure. It’s a better alternative to liquid cooling (in some cases), phase change materials, or traditional fire barriers.

This PyroThin technology essentially put ASPN back on the map. The energy industrial business is stable, but it never was a high growth product that the market appreciated. Today, PyroThin technology makes up ~67% of the business and is the sole supplier for GM, as well as Volvo Trucks and some OEMS, but more to come on this later.

I’ve had ASPN on my watchlist for a while as it’s always been a fairly undervalued name that I think has very good potential given the bullish outlook for EV’s and AV’s and hence the need for lithium-ion batteries. Of course, in the longer term as battery technology improves, lithium-ion batteries may become more obsolete and replaced by hydrogen fuel, or solid-state batteries, but I don’t deem these a risk for the next 5 years or so for ASPN.

The thermal barriers market is currently valued ~$18.9 billion and expected to grow to $30 billion by 2032 which is approximately a 6.5% CAGR. Though not a massively high growth market yet because of the unknowns around the EV & AV market, I think 6.5% CAGR is definitely on the lower end of what likely will happen. Also, with revenue currently at $452 million in FY24, ASPN currently have 2.4% of the total TAM with a load of opportunities ahead for PyroThin technology, particularly if they can get some success outside of the EV market too.

I first started following the company when the stock was dropping in 2022 from the +$50 range. Today, is probably the only range where I would consider initiating a position simply the risk to reward here is promising. The stock has had a pretty shocking month post earnings dropping ~34%, but has this made it the perfect time to invest?

---

The bulk of this writeup is behind a paywall. Here’s what paid subscribers get access to:

1. Detailed earnings review

2. ASPN opportunities

3. ASPN valuation

👇