Why is the Novonix (ASX:NVX) share price down 44% YTD?

a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.

The Novonix Ltd (ASX: NVX) share price finished in the red on Monday, closing at $5.12, down 0.19% on the day.

It’s been a difficult year for Novonix shareholders who have seen their holdings lose more than 44% in value since trading recommenced in 2022.

While the company has struggled, the S&P/ASX All Technology Index (ASX: XTX) has also faltered more than 22% this year so far. However, Novonix is still trailing well behind the broad tech sector over that time.

What’s up with Novonix shares?

The market has punished the battery materials and technology company in recent months with Novonix shares continuing their rapid descent from a high of $10.68 in early January.

At the same time, the broad tech sector has taken a downturn as well. In fact, Novonix tends to track the index quite closely, as shown below.

TradingView Chart

Not only that, but rising yields on long-dated bonds has resulted in a correction to high-beta and high-growth equities in 2022.

The relationship between bond yields and stock valuations is inversely related, so the rise in yields has compressed ASX tech share valuations this year to date (as shown below).

TradingView Chart

Hence, with a downturn in the wider sector, this appears to have spilled over into downward pressure on Novonix as well.

Today, the company’s shares traded at near six-month lows on volumes less than 50% of the four-week trading average.

Investors have been piling out of the company since it reported a much larger expenditure base for the first half. Brokers took notice of the blowout too and made note of the company’s capital management.

Last month, Morgans said that Novonix had spent almost $9 million more than the broker’s estimates on operations and that headcount has doubled in its battery testing services division.

As a result of its market forecasts and the likelihood of operating costs increasing again next year, the broker lowered its valuation to $4.88 per share but kept a hold rating on the stock.

Novonix share price snapshot

In the last 12 months, the Novonix share price has shot up around 85% and is leading the benchmark over that time.

However, in the last month alone it has collapsed 22% and is flat over the last five days of trading.

The company has a market capitalisation of $2.4 billion.

The post Why is the Novonix (ASX:NVX) share price down 44% YTD? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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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