Canoo Inc. is a Los Angeles-based technology company that designs, engineers, develops, and manufactures electric vehicles for commercial and personal use. It uses skateboard architecture technology for B2B and lifestyle delivery vehicles as well as multipurpose vehicles throughout the United States. Canoo’s modular electric platform is built to deliver maximum interior space in vehicles. 

Canoo also has a wide range of application options for individuals as well as businesses. Canoo is an interesting speculative investment in the EV market.

GOEV stock is currently in my bearish zone. (See Canoo Inc. stock charts on TipRanks)

Volatile EV market

One of the reasons for this stance is the volatility of the EV market. EV stocks experienced a surge and a fall that made many investors feel uncomfortable since the pandemic. Bears have been arguing about Canoo’s valuation, while bulls argue that Canoo’s long-term growth prospects justify the valuation.

Canoo is volatile due to its status as a special purpose acquisition company, but that is not all. SPAC market has become extremely volatile due to the speculation of reverse merger companies.

GOEV stock fluctuated in a huge range between $5.75 and $25 over the last year. GOEV stock currently trades at the lower end this range due to growing bearish sentiment about this company.

Can Canoo come roaring back? Is the music getting quiet? Let’s go!

Key Catalysts for GOEV Stock

Perhaps the most bullish argument that can be made for GOEV stock is that this company is a potential short squeeze candidate. Retail investors might be willing to gamble on the stock squeezeing simply because of its recent short interest.

It is possible to take such a position. Others companies that have low share prices and high short-interest and borrow fees rates as well as low floats have also squeezed. The issue is the possibility that GOEV stock will gain the momentum needed to launch such a squeeze.

Reddit users who were looking for short-term investment opportunities helped GOEV stock rise by 35% earlier this year. Almost 33% of floating shares in the company were shorted.  

But sentiment on Reddit groups WallStreetBets and Reddit has been more calm since that time. According to Canoo’s May first quarter results, investors are more worried about Canoo not recording any revenue and running an operating loss of almost $97 million. Canoo saw a short-term boost when it finished the quarter with $641 millions in cash and equivalents.

Although the Q2 results showed a greater than anticipated loss, Canoo managed to produce 9,500 binding pre-orders. Moreover, loss from operations is also down by 426.8% year-over-year, while total assets took a blow of over $700 million, nearly a 6% fall year-over-year. In addition, net loss increased by around 385% to $110million.

Canoo also reported an EBITDA loss in excess of $76 million, a significant increase from the $17.7 million recorded during 2020’s same quarter. Canoo reported negative operating cash flow of $108.8million and cash amounts around $565 million.  

These numbers aren’t very bullish.

The Bigger Picture for GOEV

According to Tony Aquila, CEO of GOEV, the company is planning to introduce sustainable and affordable vehicle options to the global market. It takes time for this strategy to be implemented. Investors shouldn’t look at the past results in isolation of what lies ahead.

Canoo made some notable decisions recently. Canoo secured a contract for manufacturing with VDL Nedcar. Second, Oklahoma was chosen by the company as its partner in the construction of the plant.

Canoo was able to source 87% of its production components in the third quarter. This is 13 percentage points more than the previous year. Canoo has successfully sourced 95%, including bulk materials. This is a good sign that production will begin as expected.

Canoo will launch its first product by 2022. The company plans to follow this up with multiple delivery vehicles and pickup trucks. Aquila added that the company is looking to secure the company’s future and plans to focus on the fundamentals. Aquila claims stock prices don’t always reflect positive events and catalysts.

It is currently in pre-revenue and in line with analysts’ expectations for revenues of $75 million by 2022. Given the market capitalization of $2.15 trillion, this would indicate a higher price-to-sales ratio of 25.

Indeed, most fundamentals-oriented investors would say that’s high. This is possible, however, for Canoo with its growth potential. We will see.

What does the Analyst consensus say about GOEV Stock stock?

Canoo’s consensus analyst rating is Hold according to TipRanks. There are 4 analyst ratings: 2 Buy recommendations and 1 Hold recommendation.

Canoo’s average price target for the stock is $11.50. This implies a potential upside of 27.21%. Analyst targets for price range between $19 and $5.

Bottom Line

There’s an intriguing bull and bear case to make with GOEV stock right now. The EV space is attracting more competition, which makes it more interesting to follow. It is difficult to pick the winners from this pool in its early stages.

Canoo offers a great opportunity with high upside but also carries great risk. Investors should therefore size their positions appropriately when considering such speculative play.

Disclosure: Chris MacDonald had no position at the time this article was published.

Disclaimer: Information in this article does not necessarily reflect those of TipRanks. TipRanks cannot guarantee the reliability, completeness or accuracy of any information. This article is not intended to be interpreted as an offer or recommendation for the purchase or sale of securities. The article does not provide legal, financial, investment, or professional advice. It also doesn’t take into consideration the individual needs or requirements. Neither is the information contained in it a complete or comprehensive statement about the subject or issues discussed. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the article’s content. You are responsible for your actions based upon the articles. TipRanks’ or any affiliates does not endorse this link. Performance in the past is no guarantee of future performance, price or results.