Just how much further can BrainChip shares fall?

A man looks nervous as he inflates a balloon, scared it might pop.

A man looks nervous as he inflates a balloon, scared it might pop.

Brainchip Holdings Ltd (ASX: BRN) shares are having another poor session on Tuesday.

In afternoon trade, the struggling semiconductor company’s shares are down 2% to 42 cents.

This means that Brainchip shares are now down 44% since the start of the year.

That’s despite its shares recently rebounding from a 52-week low of 35 cents.

Where next for Brainchip shares?

Unfortunately, given that no major brokers cover Brainchip, which is highly unusual for an ASX 200 stock and a potential red flag, it is difficult to say where its shares are heading from here.

However, with a market capitalisation approaching $750 million and quarterly cash inflows of just US$40,000 during the last quarter, clearly there is scope for its shares to come crashing down to earth.

And while it is fair to say that some companies are valued on their potential rather than their earnings, Brainchip has not demonstrated that it has the ability to deliver on any supposed potential.

If you trace the Brainchip story back long enough, you will find countless times where the company believed it was on the cusp of making it big in a huge market. But all its announcements led to nothing.

Unfortunately, there’s nothing to say that it will not be the case again this time around. Particularly after, in many respects, the company recently admitted that the much-hyped original Akida platform was not good enough for its target market.

If the same happens with the new Akida platform, it wouldn’t be surprising to see Brainchip shares fall materially.

All eyes will be on Brainchip later this month when management comes face to face with its shareholders at its annual general meeting. It certainly will be interesting to see if shareholders vote in favour of the very generous share issues after its abject performance.

The post Just how much further can BrainChip shares fall? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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