As a speculative play on a compelling narrative, few command the upside potential of innovative lithium-ion battery manufacturer Enovix (NASDAQ:ENVX). Unfortunately, with macroeconomic headwinds applying pressure to the market throughout this year, investors sought substance from the company’s third-quarter earnings report, but received disappointments instead. As a result, stakeholders rushed for the exits, sending ENVX stock down a staggering 40%.
According to MarketWatch, “Enovix on Tuesday afternoon reported a net loss of $82 million, or 53 cents a share, for the three months to Oct. 2, against a year-earlier loss of $10.8 million, or 14 cents a share. The consensus estimate was for a loss of 20 cents a share, based on a FactSet poll.” On an adjusted basis, though, Enovix reported a loss of 15 cents, narrower than the 16-cent loss analysts targeted.
On the top line, revenue came out to a paltry $8,000. Enovix shipped a modest number of batteries to customers for qualification programs and pre-production end-product builds, per MarketWatch. Management mentioned a majority of the shipped batteries represented samples that didn’t generate revenue. Interestingly, the consensus sales target was $400,000.
In premarket trading on Wednesday, ENVX stock fell 20% before extending losses sharply on the opening bell. At time of writing, shares fell even further to 42% below parity.
ENVX Stock Brings Innovation Instead of Substance
Although the current downfall of ENVX stock implies a completely derelict underlying corporation, the reality is Enovix potentially offers a groundbreaking innovation. Leveraging silicon as its anode material, Enovix aims to deliver higher energy density than what traditional lithium-ion batteries can offer.
Currently, the company focuses on physically smaller applications, such as eyewear cells and smartphone and laptop batteries. Nevertheless, its press releases demonstrate that Enovix has its eye on electric vehicles (EVs).
“Fast charge capability can accelerate mass adoption of EVs and we’ve 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, back in June of this year.
Although the EV sector presents myriad opportunities that may bolster ENVX stock, the advanced-battery space features much competition. Not only that, the competition has stumbled badly. For instance, solid-state battery specialist QuantumScape (NYSE:QS) dropped over 63% of equity value so far this year.
For Enovix specifically, the company faces questions about sustainability. While it does feature a solid balance sheet backed by a strong cash position, investors clearly want to see substantive progress. Providing largely narratives – such as the underlying implication that product samples may lead to business expansion – the lack of hard data badly hurt ENVX stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.