Why the CleanSpace (ASX:CSX) share price is diving 50%

The CleanSpace Holdings Ltd (ASX: CSX) share price almost lost half its value following a trading update that signaled lower sales revenue

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CleanSpace Holdings Ltd (ASX: CSX) shares are free-falling today after the company released a trading update for the second half of FY21. At the time of writing, the CleanSpace share price is tumbling a whopping 50.11% to $2.21. Let’s take a look at what the company announced.

CleanSpace share price plummets on trading update

The CleanSpace share price has experienced a brutal sell-off this morning following the company’s latest trading update. CleanSpace shares also took a dive late last month after the company’s half-year results highlighted the impact of COVID-19 on current market conditions.

At the time, the company noted that there had been a shift from reactive buying to more considered purchasing of personal protective equipment (PPE). While CleanSpace said it was well-positioned for this shift, offering cost advantages and high protection, this move was expected to impact sales in the second half. 

Today’s update has confirmed this impact and sent the CleanSpace share price spiralling downwards. The business has experienced lower sales over the current quarter and CleanSpace now expects Q3 FY21 sales to be approximately $7 million. The company blames a sudden shift in North American healthcare procurement, driven by a number of compounding factors such as the acceleration of vaccine rollout programs, spending constraints and the stockpiling of low-tech disposable masks. 

The announcement attempts to reassure investors that the business is confident it will return to historically strong growth rates over the medium term. CleanSpace is making a significant investment in its sales strategy and market presence by doubling its regional sales capability, opening new distribution channels and aggressively targeting new sectors less impacted by vaccine rollouts. 

The update also points out potential tailwinds such as US President Joe Biden’s package to introduce a platform for increasing the quality of PPE and pandemic preparedness for present and future outbreaks. CleanSpace believes that government intervention in such areas has proven to be a powerful force in shaping purchasing decisions. 

Despite the positive medium to long-term implications for the PPE space, it appears that the market is far from impressed with the company’s weak sales performance over the current quarter. The CleanSpace share price has lost more than half its value in a little over an hour of trading.

CleanSpace shares are now down more than 70% over the past 12 months and around 67% year to date.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has recommended CleanSpace Holdings Limited. 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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