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Why Are Enovix (ENVX) Shares Falling 40% Today?


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As a speculative play on a compelling narrative, few master the growth potential of the innovative lithium-ion battery maker Enovix (NASDAQ:ENVX). Unfortunately, with macroeconomic headwinds weighing on the market throughout this year, investors looked for substance in the company’s third-quarter earnings report, but were instead disappointed. As a result, stakeholders rushed for the exits, sending ENVX shares down 40%.

According MarketWatch“Enovix announced Tuesday afternoon a net loss of $82 million, or 53 cents per share, for the three months to October 2, compared to a loss a year earlier of $10.8 million, or 14 cents per share. The consensus estimate was for a loss of 20 cents per share, based on a FactSet poll. On an adjusted basis, however, Enovix reported a loss of 15 cents, narrower than analysts at loss of 16 cents targeted.

First, revenues amounted to a measly $8,000. Enovix has shipped a small number of batteries to customers for qualification programs and pre-production end product releases, per MarketWatch. Management mentioned that the majority of batteries shipped were samples that did not generate revenue. Interestingly, the consensus sell target was $400,000.

In premarket trading on Wednesday, ENVX stock fell 20% before extending losses sharply at the opening bell. At the time of writing, shares have fallen a further 42% below par.

ENVX Stock brings innovation instead of substance

Although the current fall in ENVX stock implies a completely abandoned underlying company, the reality is that Enovix potentially offers game-changing innovation. By harnessing silicon as an anode material, Enovix aims to deliver higher energy density than traditional lithium-ion batteries can offer.

Currently, the company is focusing on physically smaller applications, such as eyeglass cells and smartphone and laptop battery packs. Nonetheless, its press releases demonstrate that Enovix has its eye on electric vehicles (EVs).

“Fast charging capability can accelerate mass adoption of electric vehicles and we have been able to demonstrate a level of performance that meets and exceeds many OEM roadmaps,” said Harrold Rust, co-founder, CEO and president of Enovix, last June. year.

Although the electric vehicle sector presents a myriad of opportunities that could bolster ENVX stock, the advanced battery space presents strong competition. Not only that, the competition has stumbled badly. For example, the solid-state battery specialist QuantumScape (NYSE:QS) has fallen more than 63% in equity value so far this year.

For Enovix in particular, the company faces questions about sustainability. Although it has a strong balance sheet backed by a strong cash position, investors clearly want to see substantial progress. Largely providing narratives – such as the underlying implication that product samples can lead to business expansion – the lack of hard data has hurt ENVX stock badly.

As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided critical and unique insights to investment markets, as well as various other industries including law, construction management and healthcare.

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