Why NFI Stock Plunged 20% Last Week

Continued supply chain disruptions are likely to hurt NFI Group’s financial growth in 2022.

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends NFI Group. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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