What happened?
The shares of NFI Group (TSX: NFI) dived by 20% last week, marking its worst weekly losses in more than two years. By comparison, the TSX Composite Index fell by 2% last week. With this, NFI stock has reached its lowest price level since March 2020, as it currently hovers around $11.80 per share.
So what?
NFI Group is a Winnipeg-based firm that mainly focuses on manufacturing a range of zero-emission transportation solutions, including heavy-duty electric transit buses. It currently has a market cap of around $910 million.
Last week’s massive drop in NFI stock came after the company cut its full-year 2022 guidance on April 29, citing the negative impact of the continued supply chain crisis and high inflation on its manufacturing business. In a press release, the Canadian company said that shortages of critical microprocessor modules are likely “to result in lower-than-planned deliveries in the second and third quarters of 2022.”
NFI Group now expects its adjusted EBITDA for fiscal 2020 to be in the range of US$15 million to US$45 million. This revised guidance was significantly lower compared to its original adjusted EBITDA guidance range of US$100 million to US$130 million.
This negative news took a big toll on investors’ sentiments, driving a massive selloff in its stock on Friday. While NFI stock fell by 15% that day, the recent broader market selloff kept its stock under pressure throughout the week.
Now what?
NFI has been one of the worst-performing non-tech stocks on the TSX lately. It has lost nearly 58% of its value in the last year, despite a 7.8% rise in the main Canadian market gauge during the same period.
Clearly, continued supply chain disruptions and other external factors, including rising inflation, are taking a toll on NFI stock price movement. However, the demand for its zero-emission transportation solutions continues to increase with rising environmental awareness. That’s why I expect this demand trend — especially from developed nations — to help the company maintain strong financial growth in the long term. Given that, long-term investors may consider buying NFI stock at a bargain amid the ongoing selloff.
