Li-Cycle(NYSE: LICY) stock is getting hammered this week. Heading into this Friday's market open, the lithium battery recycling specialist's share price was down 41.9% from last week's market close, according to data from S&P Global Market Intelligence.
Li-Cycle published a press release on Oct. 23 announcing that it had paused construction at its factory in Rochester, New York. The company said that construction of the facility will be paused until a comprehensive strategic review is completed.
Li-Cycle's big factory project could be in jeopardy
Li-Cycle has seen construction costs on its Rochester Hub facility come in significantly above expectations. In response, the company's board of directors decided to put further building on hold. Li-Cycle had received approval for a $375 million loan from the U.S. Department of Energy to fund the completion of the facility, and investors are worried that the funding availability could evaporate. At the very least, it looks as if Li-Cycle will need to secure additional funding if it's going to move forward with the construction of its Rochester factory.
What comes next?
Li-Cycle says that it continues to work closely with the Department of Energy on the loan for the project, but it's easy to see why investors are seriously concerned about the recent development pause. While the company has other business facilities, the Rochester Hub was planned as a serious expansion initiative that would significantly ramp up overall operations and advance its capabilities to turn recycled battery materials into battery-grade lithium, nickel, and cobalt.
Even after a precipitous stock decline this week, Li-Cycle still has a highly growth-dependent valuation.
LICY PS Ratio (Forward) data by YCharts
The battery-recycling specialist is valued at roughly 18 times this year's expected sales. With construction on a key facility paused for the foreseeable future, its growth trajectory looks significantly weaker. Li-Cycle may still be able to secure a large loan from the Department of Energy and complete the Rochester facility, but there's a lot of uncertainty on the horizon right now.
Li-Cycle plans to release its third-quarter results on Nov. 13. With its quarterly release and conference call, investors should get a closer look at the the business's near-term outlook and project review process.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
