The green industrial technology company has been struggling over the last few weeks with a largely uninterrupted fall since mid-August. There is no one reason for this ~40% drop – no broker downgrades or company news flow at least, so we have put this down to two reasons:
- Government focus: The UK has walked back on carbon neutral targets, and there is concern that other countries may follow this popularist change of tune. While the company has a low exposure to the UK, much of Calix’s value relies on companies and countries investing in ways to reduce carbon emissions, with Calix targeting high-emitting processes (cement & lime manufacturing, lithium processing and the like). There is some risk around US elections and the priority voters have for environmental outcomes at a time when the cost of living has been climbing substantially.
- Cash burn: They finished FY23 with ~$70m in cash which is expected to nearly halve in FY24. Investment in research & development, pilot projects and upfront capex for long-term projects is taking its toll on the balance sheet, while major revenue sources seem at least two years away. In the forecasting period, CXL continues to burn money in an environment where the market is shying away from these types of stocks.
While we see Calix’s technology as game-changing for a number of industries, we are now wondering if it’s a position we need to be in for now.
MM has turned more neutral on CXL given cash burn
Add To Hit List
