Novonix share price sinks 8% following 'gun shy' broker note

Novonix shares are taking another beating on Monday…

| More on:
a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the Pilbara Minerals share price continue to fall

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Novonix shares have taken a tumble on Monday
  • The battery technology company's shares are now down almost 80% in 2022
  • A cautious broker note out of Morgans appears to be the catalyst for today's decline

The Novonix Ltd (ASX: NVX) share price has started the week deep in the red.

In afternoon trade, the battery technology company's shares are down 8% to $2.26.

This means the Novonix share price is now down almost 80% since the start of the year.

Why is the Novonix share price sinking?

Investors have been selling down the company's shares on Monday in response to a cautious broker note out of Morgans.

For several months the broker has had a hold rating and $4.88 price target on the Novonix's shares. While only a hold rating, this price target no doubt sparked hopes that there was significant upside ahead for its shares over the next 12 months.

However, those hopes have been extinguished today after Morgans took an axe to its price target.

According to the note, the broker has retained its hold rating but cut its price target by 39% to $2.88.

What did Morgans say?

Morgans notes that the risk off sentiment is now reflected in the Novonix share price but it is still feeling "gun shy."

It explained:

We have deferred our expectations for revenue as commissioning continues on the Riverside anode facility. NVX has not provided further updates on the progress of a firm offtake with Samsung and we suspect it will take longer than hoped.

The market is pricing in risk much more aggressively and NVX has not yet proven the viability of its anode business with blue chip clients at scale.

We have therefore reduced our target price to $2.98 (-39%) with a higher assumed cost of equity and a later assumed ramp up of production.

All in all, it appears as though the broker doesn't feel the risk reward on offer with Novonix's shares is compelling enough at this point despite its sizeable decline in 2022.

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.

More on Materials Shares

smiling worker stands before power generator technology
Materials Shares

Fortescue shares jump 5% on record performance

This mining giant was in fine form during the quarter.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Materials Shares

Should you buy Pilbara Minerals shares today?

Let's see if analysts think investors should be buying the lithium giant's shares.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

Expert says this ASX mining stock could rise almost 30%

Let's see which miner is being tipped as a buy for investors right now.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

BHP shares charge higher on record copper and iron ore production

Let's see how the miner performed during the fourth quarter.

Read more »

A man stands with hands on hips surveying construction of three high-rise buildings.
Materials Shares

Building activity on the rise – will ASX materials shares benefit?

New data from the March quarter shows a sharp rise in building activity. 

Read more »

Man smiling at a laptop because of a rising share price.
Materials Shares

Macquarie predicts 11% upside for this ASX materials stock

Here's why the broker is positive on the stock.

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Rio Tinto share price falls on Q2 update

Let's see what the mining giant reported for the second quarter.

Read more »

a man in a hard hat and high visibility vest smiles as he stands in the foreground of heavy mining equipment on a mine site.
Materials Shares

Could these 3 ASX materials shares be set to double?

This broker has buy ratings and aggressive price targets for these holdings. 

Read more »