Novonix: Is the 40% Pullback Creating a Buying Opportunity?

Institutional Support Grows as Offtake Loss Tests Market Confidence

There is a clear divide in sentiment among investors toward Novonix (ASX: NVX) at the moment. On one hand, institutional confidence appears to be strengthening, with The Bank of New York Mellon Corporation lifting its holding from 8% to 10%, now managing roughly 84 million shares on behalf of major investors. This kind of accumulation suggests that large institutions still see long-term value in Novonix’s battery materials story.

On the other hand, the recent loss of its offtake agreement with FCA US LLC, a subsidiary of Stellantis NV, has raised questions about the company’s near-term outlook. The agreement, originally signed in November 2024, covered a minimum of 86,000 tonnes and up to 115,000 tonnes of synthetic graphite over six years, with first supply expected in January 2026. The termination is a meaningful setback given the scale of the deal and its role in underpinning Novonix’s early commercialisation plans. The focus now turns to whether the company can replace this lost volume and maintain momentum as it continues positioning itself within the growing US battery supply chain.

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Novonix Expands Its US Footprint as Production Capacity and Government Backing Grow

For a refresher, NVX currently generates revenue through two main business segments: anode material sales and cathode technology development.

The company’s core revenue stream comes from its production and sale of synthetic graphite anode materials, which are supplied to electric vehicle battery manufacturers. NOVONIX has already secured long-term supply agreements with major global partners, including Panasonic, Stellantis, and PowerCo. Its first commercial production site, the Riverside facility in Tennessee, is expected to begin by producing approximately 3,000 tonnes per year, with plans to expand capacity to 20,000 tonnes as operations scale and demand grows.

A second, significantly larger plant known as Enterprise South is also planned. Once operational, this facility will lift total production capacity beyond 50,000 tonnes per year. To support construction, the U.S. Department of Energy has provided a loan of around USD 754 million, underscoring government confidence in NOVONIX’s strategic role in the domestic battery supply chain.

While the company remains in its build-out phase and current revenues are modest, management expects substantial growth from 2026 onwards as commercial operations ramp up.

Novonix: Short-Term Setback, Long-Term Opportunity

Looking at the short-term cash flows, the loss of this agreement has reduced near-term revenue expectations and the associated cash inflows that were previously factored into the valuation. The correction in the share price reflects this adjustment in expectations. The company remains unprofitable and, given the capital-intensive nature of its business model, will need to continue investing heavily to achieve scale. According to analyst estimates, if the company successfully commercialises large-scale production with its current partners, it could generate around A$200M in revenue by 2026. This would imply a price-to-sales multiple of roughly 39x today, falling closer to 2x by 2026 as operations expand and revenue scales.

Even with the loss of a customer, the business still holds the potential to reach A$1.00 per share over the next year, provided execution remains on track. For risk-averse investors, however, it is important to recognise that volatility will likely persist. For this valuation to materialise, management must deliver on commercial milestones, scale efficiently, and meet its key customer commitments.