Canoo (NASDAQ:GOEV) is trading well below the level reached immediately after the initial public offering. A spike and then a fall in the electric vehicle sector dramatically reduced GOEV’s stock. For now, Canoo’s share price is highly correlated with market sentiment for EV stock.
Canoo won’t stand out from the EV crowd until it starts generating revenue. The company showed no revenue in the fourth quarter.
Pure speculation in GOEV stocks
Since Canoo is still in the development stage, it is easy to call it a sale. The company probably wanted to capitalize on the euphoria of EV stock. And although the notorious bubble in the sector has burst, space can still bounce back. The US Infrastructure Spending Bill will be a macro catalyst. In addition, many countries are looking to replace their gas-powered vehicles with electric vehicles in the next 10-25 years.
The company showed no revenue in the fourth quarter. The EBITDA loss, excluding some items, exceeded $ 42.5 million. Canoo is forecasting even bigger losses for the current quarter. The company’s expenses, excluding certain items, will be in the range of $ 45 million to $ 50 million, and its capital expenditures will be in the range of $ 10 million to $ 12 million.
Executive Chairman Tony Aquila said: “We create cars that are free from legacy constraints and develop technologies and functional designs to create electric vehicles for all.” The announcement suggests Canoo is targeting the mass market and has lower operating costs than a number of other EV makers.
Akila added: “We believe we are the first OEM to consider the full life cycle of a vehicle and build it at multiple revenue touch points.”
More losses ahead
It is possible to estimate how much Canoo will lose from each electric vehicle sold. Its mandate to bring EVs to everyone could mean it will have negative operating margins. When Tesla (NASDAQ:TSLA) started selling electric vehicles, it was targeting higher-income consumers. Only after a growing fan base is Tesla targeting the mass market with the Model 3.
Investors who bet on Nikola (NASDAQ:NCLA) and the lost money shouldn’t make the same mistake when buying GOEV shares. The former Nikola CEO eventually admitted that his electric truck, featured in the commercial, was not self-propelled, as the company said.
Workhorse (NASDAQ:WKHS) is another example of an unsuccessful electric car. For nearly a year, Workhorse has hinted that it will win the deal with the US Postal Service. Instead, the USPS contracted with a larger firm. USPS did not order vehicles from Workhorse.
Nikola, Hackney, and Canou share a common red flag; none of them generate income. However, Canoo has received a sharp influx of money from investors. This liquidity justified the short-term rally in the stock. In the long term, however, competition in the electric vehicle space will grow and investors will quickly shift their money to games that have proven themselves.
Overpriced target price
On Wall Street, three analysts have a target price for GOEV stock. Their average goal is $ 12, according to TipRanks… Merrill lynchwith a sell rating and a target price of $ 6 per name, it is the only firm to reasonably value the stock. Canoo is far from ready to trade as a public company because it will report losses for the foreseeable future.
The car launches and initial sales will be a positive catalyst for Canoo and GOEV shares. But it is very likely that delays will occur and the cost will be higher than many investors anticipate. Canoo claims it has an edge over others in space, but it remains to be proven.
Tesla stock may look expensive today, but the company is a leader in electric vehicles. Investors may also consider buying shares in utilities that use clean energy en masse. Such names have more perspective than GOEV stocks.
As of the date of publication, Chris Lau did not have (directly or indirectly) any of the positions in the securities referred to in this article.