Down 76% this YTD, can the Novonix share price claw back gains?

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.

Beaten-down battery technology company Novonix Ltd (ASX: NVX) extended its losses on Tuesday, closing 0.46% lower at $2.16 apiece.

This brings the company’s losses to more than 76% year to date, well ahead of sector indices and benchmarks.

For instance, the S&P/ASX 200 Index (ASX: XJO) is down 10.7% this year to date while the S&P/ASX All Technology Index (ASX: XTX) is 32% lower.

Where to next for the Novonix share price?

Novonix has given back all of its gains earned from 2021 to date. Its share price now trades back at January 2021 levels, having soared to a high of $12.16 in December last year.

Since then, shareholders have endured a one-way ticket south – at a pace much faster than the wider market.

As it stands, the Novonix share price now needs to gain 233% to return to its January 2022 levels.

To reach its all-time high, it needs to appreciate more than 460%, something that seems highly improbable in the current climate. The downtrend in the Novonix share price is shown on the chart below.

TradingView Chart

Clearly, the downside has been heavy for Novonix investors.

The company’s market capitalisation is currently valued at just over $1 billion. That’s a considerable drop from a market cap of $4.4 billion in December. This, too, on an asset base of $438 million.

Some market watchers are questioning how a $4 billion company — in December — delivered just $5 million in H1 FY22 revenue, a loss of $15 million in cash from operations (CFFO), and a net loss of $28 million.

For reference, Dicker Data Ltd (ASX: DDR) is another ASX tech company valued at around $2.1 billion. It delivered FY21 revenue of $2.5 billion, CFFO of $20 million, and an after-tax profit of $73 million.

‘Liquidity era’ closing

The ‘pandemic era’ of 2020-2021 was marked by tremendous amounts of cheap liquidity coursing throughout the veins of financial markets.

Investors were happy to pay a premium for the promise of growth and return, set to occur sometime in the future.

This resulted in an enormous upswing in speculative investing, whereby unprofitable companies were re-valued at exorbitant multiples. Record low interest rates and a ‘risk-on’ attitude helped fuel the sentiment.

But, fast forward, and the market has shied away from rewarding unprofitable companies in 2022. This is evident through the large wind-down in growth and tech stocks.

Morgans is neutral on Novonix shares, valuing them at $2.98 apiece after a roughly 40% slice to its previous valuation.

Hence, with the prospects for tech shares dwindling in FY23, it remains to be seen if Novonix can re-rate to the upside. It seems the price of lithium and graphite might not have a strong bearing on the company’s share price.

After all, Novonix touts itself as a “battery materials and technology company” and is rated in the tech sector by the Global Industry Classification Standard (GICS).

The post Down 76% this YTD, can the Novonix share price claw back gains? 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 Scott Phillips.

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