Why Tritium shares dropped 15% today

What went up just came back down.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Easy come, easy go. After two straight days of mind-boggling gains, shares of tiny, relatively unknown -- at least up until this week -- Australian electrical equipment stock Tritium DCFC Limited (NASDAQ: DCFC) are succumbing to gravity this morning.

By market close, the maker of charging stations for electric vehicles saw its stock slide 15.1%.

So what

Let's recap, shall we? On Tuesday, Tritium stock soared on an announcement that it is building a new factory in Tennessee. One day later, Tritium stock was off to the races once again, this time because President Biden stood on a stage and praised the company (and its new Tennessee factory) by name.

To an extent, this was a logical reaction: After all, President Biden's trillion-dollar infrastructure bill, which passed late last year, contains some $7.5 billion worth of federal funding to support companies working to create a network of 500,000 electric vehicle charging stations in the U.S. And Tritium will almost certainly share in this loot, now that the president has put his imprimatur of approval upon it.

Now what

It's logical, therefore, to assume that Tritium is now in line to receive millions (or even tens of millions) of federal revenue dollars on its top line. For a company that did barely $56 million in sales over the last 12 months, this is a big deal.

That being said, Tritium has not yet shown itself capable of turning any level of revenue into real profit on the bottom line. Subsidies from the government will certainly help with that -- in fact, I'd go so far as to say it's now more likely than not that Tritium will turn profitable over the next several years. But will it be profitable enough to justify the $2.1 billion market capitalization that the company has amassed over the past couple of days?

That remains to be seen -- and until it is seen, investors are right to be cautious. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Rich Smith 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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