Shares in battery technology provider Novonix Ltd (ASX: NVX) have sunk almost 18% since 2 December.
But the stock was still, by far, the best performing ASX tech share in 2021.
The Novonix share price rocketed 660%, riding the themes of green energy and the electrification of the motor car to the sunset.
There was daylight second, as the next best, Life360 Inc (ASX: 360), managed “just” a 157% return.
So does this mean now is a golden opportunity to buy Novonix shares?
Not much revenue, certainly no profit yet
The first thing to note is that Novonix is still at a very early stage of business development.
It’s certainly far from making a profit and doesn’t even generate that much revenue for a company with a market capitalisation of more than $5 billion.
In the 2021 financial year, Novonix reported $5.2 million of revenue. That’s almost a 1000-times valuation-to-sales ratio.
This is why it’s a polarising stock among analysts.
“A profit isn’t expected to be achieved for a few years so it will be incredibly announcement driven,” read a memo from Marcus Today last month.
“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.”
Not sure if Novonix is a bargain yet
The current dip is largely the consequence of an eye-watering 32.4% fall on 3 December.
For the team at Marcus Today, the lack of information behind this descent is worrying.
“An unexplained 34% fall [in early December] should be a bit of a red flag,” the memo read.
“The move has taken some of the froth off the top, which is putting it back in the focus of ‘bargain hunters’.”
Considering these uncertainties, the Marcus Today analysts don’t think investors should be piling in at current price levels.
“The near-term picture doesn’t offer that much of a compelling reason to get involved,” the memo stated.
“Demand for its products is expected to gain momentum but until there are more cash flows, it is hard to value.”
Novonix shares closed Thursday at $9.94, down 6.9% on the day.