Can the Novonix share price hit the comeback trail in June?

Let’s examine where the share price could be headed.

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Key points

  • Novonix shares extend losses today as sellers continue pushing prices lower 
  • The outlook for the Novonix share price is murky based on a myriad of factors 
  • In the last 12 months, the Novonix share price has held a 37.5% gain 

Shares of Novonix Ltd (ASX: NVX) have sunk 4% in the red on Friday and now trade at $3.08 apiece.

The slide brings losses to more than 66% this year to date for the company, and over 74% from its 52-week closing high of $12.15.

The question now becomes if Novonix can restart its growth engine and push back toward these former highs.

Can the Novonix share price revive itself?

We’ve got to at least gauge the market’s prospects in order to address this question. According to its Annual Energy Paper 2022, JP Morgan notes that “global [electric vehicle] sales gathered steam in 2021, growing to almost 9% of total vehicle sales”.

“Although to be clear, EVs are still just 1.5% of the global fleet of vehicles on the road,” it added.

The JP Morgan team also noted the substantial increase in battery costs, underscored by surging commodities used in their production.

Estimated battery costs have also risen approximately $500–$1,500 since January 2020 across various battery styles, it says.

“EV buyers can expect to offset part of this price increase via lower fuel costs if the current gap between gasoline and electricity costs per mile is sustained,” the team remarked.

With the price of oil and gasoline surging at equal pace, some might argue the case is stronger for the transition.

But the market also prices stocks on a blend of past earnings history, and forward earnings expectations, according to Peter Lynch, in his book, One up on Wall Street.

According to Bloomberg consensus data, Novonix is forecast to grow revenue by 69% year on year to $8.8 million in FY22, with that expanding more than 478% to $51 million in FY23 and $141 million in FY24.

However, it’s also forecast to produce a net loss into FY23, before turning profitable in FY24, according to this data.

Noteworthy is that FY22’s projected loss of $35 million is more than its FY21 result of a $16 million loss.

It’s not uncommon for ‘growth‘ companies to present with negative earnings and high revenue growth forecasts. However, the high-growth trade has arguably unwound itself this year.

For instance, the Vanguard Growth ETF (NYSE: VUG) has tanked 26% in the last 6 months, whereas the BetaShares Diversified All Growth ETF (ASX: DHHF) has slipped more than 10%, both behind the benchmark.

The striking similarity in these instruments and their directional movement is shown on the chart below.

TradingView Chart

The culmination of these pressures means the future outlook of the Novonix share price is murky.

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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