Those lucky enough to have Novonix Ltd (ASX: NVX) shares since the start of the year would have had a broad smile on their face eating their Christmas turkey.
The stock price for the battery materials company has rocketed 594% since the fireworks went off at the start of January.
So now the dilemma is what to do with a stellar performer as we head into the new year.
If you have it, do you hold onto it or take the profits? If you don’t have it, is it too late to buy in or has the ship sailed?
The team at Marcus Today had some thoughts.
No profit, not much revenue (yet)
Firstly, it must be noted that Novonix is a polarising stock.
The company is a long way from turning a profit, and doesn’t yet make a huge amount of revenue — not much more than $5 million — considering its valuation.
“A profit isn’t expected to be achieved for a few years so it will be incredibly announcement driven,” read the memo from Marcus Today.
“Deals with EV [electric vehicle] and tech companies to shore up supply chains likely to drive performance but that will come in dribs and drabs.”
Massive unexplained fall in share price
Secondly, despite this year’s spectacular rise, the share price has fallen almost 28% this month.
This worries the team at Marcus Today.
“An unexplained 34% fall [in early December] should be a bit of a red flag,” the memo stated.
“The move has taken some of the froth off the top, which is putting it back in the focus of ‘bargain hunters’. [But] unclear if it is a bargain at current levels given the eye-watering valuation at 723x revenue.”
We need to see more runs on the board
A little bit more tangible progress would be needed before the Marcus Today team would buy in.
It noted Novonix does have some heavy hitters on its board, which “looks like it has some leverage in Washington [DC]”.
“Favourable legislative outcomes from the US are another possible tailwind,” the memo read.
“A period of share price consolidation around the 900c level, progress on its production capacity and a deal or two would make it look more appealing.”
So for now, Marcus Today would not get involved, although if you already own Novonix shares you’d want to hold onto them.
“The near-term picture doesn’t offer that much of a compelling reason to get involved,” the team stated.
“Demand for its products are expected to gain momentum but until there are more cash flows, it is hard to value. No obvious reason to sell if you have decided to hold. HOLD.”
The post Novonix (ASX:NVX) shares rocketed 600% this year. Now what? appeared first on The Motley Fool Australia.
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More reading
- Will Novonix (ASX:NVX) grow into its multibillion-dollar valuation in 2022?
- 5 investment themes to watch on the ASX share market in 2022
- The Novonix share price has tumbled 25% so far in December. What’s going wrong?
- Here are the top 10 ASX shares today
- Novonix (ASX:NVX) share price shrugs off this morning’s gains to plunge 4% lower
Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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