After attempting to rebound earlier this year, Mullen Automotive (NASDAQ:MULN) shares have experienced another sharp price decline over the past month. Now trading for just over a dime, MULN stock is now more than ever in the stock market scrapyard.
Yet while the market may have written off Mullen as an investment opportunity, Microsoft’s (NASDAQ:MSFT) Bing AI platform begs to differ.
Powered by the same technology powering OpenAI’s ChatGPT, Bing AI typically does not explicitly give an opinion as to whether a stock is a buy, sell, or hold. However, with MULN, Bing AI was bullish.
That said, while impressive that the chatbot provided a clear and concise bull case for shares in this fledgling electric vehicle company, it doesn’t consider a key reason behind this stock’s tremendous decline.
Bing AI’s Bull Case for MULN Stock
For this article, I asked Bing AI to provide me with an argument in support of buying Mullen Automotive shares. The chatbot replied with a six-paragraph response, which it titled, “Why Mullen Stock is a Buy Despite its Legal Troubles.”
Below, I summarize this response. According to BingAI, despite “being under pressure lately due to various legal issues,” MULN stock is a buy, for these three reasons:
“First, Mullen has a promising product pipeline that includes its flagship SUV, the Dragonfly K50.”
“Second, Mullen is also diversified into other segments of the EV market, such as commercial vehicles and battery systems.”
“Third, Mullen has secured several strategic partnerships and investments that will help it scale up its production and distribution capabilities.”
Bing AI then concluded that, based upon these three factors, MULN was “undervalued at its current price,” adding that it is a “compelling opportunity for long-term investors who are bullish on the EV sector.”
Reading this seemingly substantive bull case, it may seem like Mullen may just well be worth the risk. However, dive a little deeper and the more you scrutinize Bing AI’s argument, the more it becomes dubious.
Dismantling This Chatbot’s Argument
Regarding discussion of recent legal issues with Mullen Automotive, Bing AI appears to have its facts straight. In the full aforementioned response, the chatbot referenced “a failed class action lawsuit, a dispute with its former auditor, and a complaint from its creditors.”
Each of these legal issues has been discussed in coverage of MULN stock here at InvestorPlace. In these articles, sources were fully cited.
For instance, back in January, InvestorPlace’s Eddie Pan reported on the class action litigation. Just recently, InvestorPlace’s David Moadel discussed both the auditor dispute, along with the creditor complaint.
But diving into Bing AI’s three-point bull case for MULN, there are some clear flaws in its argument. Namely, perhaps the first argument is erroneous. It was only this week that Mullen finalized a deal with original manufacturer Qiantu Motors to assemble and distribute this vehicle in North and South America. It may be more accurate to say that the Mullen Five, an electric crossover, is the company’s flagship EV.
Upon further research, points two and three are accurate. Yet while these two points are factually sound, whether this translates into big (or any) upside potential is another thing.
Bing AI backs up its argument with accurate statements about recent and not-so-recent developments with Mullen. However, what this chatbot ignores to do is inspect MULN’s horrendous fundamentals.
MULN has lost nearly 96% of its value in the past year. Make no mistake, this was not a market overreaction. As I have argued before, this EV maker has incinerated large amounts of cash, requiring it to lean heavily on dilutive capital raises to stay in business.
This dilution is why each share of Mullen today trades for just over a dime. It’s also why, in the off chance the company finds success with any of its EV endeavors, future upside potential is minimal.
Even as Bing AI makes an argument supporting MULN stock, consider it best to take its opinion with a grain of salt.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.