Don’t Fall for It: Canoo Stock Is NOT Worth a Speculative Buy Right Now

Stocks to sell

Canoo (NASDAQ:GOEV) stock is a unique EV stock.

A lifestyle vehicle company, Canoo produces vans which are partly retro and partly utilitarian, for a very specific buyer.

While the company has stood out among some investors because of its backlog, like all EV manufacturers, Canoo has run into funding and production issues in the company’s bid to convert sales orders to deliveries. 

Brought public via a special purpose acquisition company (SPAC) reverse merger in late-2020, Canoo ran to an impressive valuation, before giving up more than 90% of those gains since then.

Now trading around 50 cents per share, some investors may view this stock as attractively-priced for a speculative bet.

Here’s why I think that’s not the case for this EV stock.

A Closer Look at GOEV Stock

Canoo’s stock has dropped 51% year-to-date, displaying a bearish trend. It’s currently consolidating within a wide range, held below the 200-day EMA, suggesting a downtrend. Struggles to maintain prices above the 50-day EMA reveal seller dominance.

In February, Canoo’s stock fell below the $1.00 support level, sparking negative sentiment. It then continued to drop, creating lower lows and correcting by 50% quickly.

The decline paused around $0.5000, followed by a brief recovery. However, encountering resistance at $0.8000 led to renewed downward movement.

Canoo’s stock has consolidated within the range of $0.4180 to $0.8519 for several months. Despite multiple attempts, buyers couldn’t surpass the upper range resistance.

Although buying volume surged significantly, these gains were short-lived because of speculative movement and an inability to maintain higher levels.

Recent Updates

GOEV stock is experiencing a notable decline post its Q2 earnings announcement this week. Prior to today’s market opening, the EV company’s shares were down 13.7% from last week’s close. 

After releasing Q2 results on August 14, Canoo reported a smaller loss than expected. It has an actual loss of $0.14 per share compared to an estimated $0.19 per share. The stock initially rose after-hours but later dropped during daily trading and continued to decrease throughout the week.

Despite Q2’s narrower loss, the market remains skeptical about Canoo’s future. While the company claimed to be in the income generation phase, it recorded no sales during the period.

They announced a deal with a Fortune 100 company for a national fleet. However, it received a neutral response from Wall Street. 

Canoo is in initial stages of production and deliveries. But, investor confidence in its ability to avoid bankruptcy and establish itself in the EV industry is waning.

What Now

While some EV stocks have flourished in 2023, Canoo has missed out on the rally. The stock is down about 64% year-to-date and nearly 98% from its all-time high in December 2020. In Q2, Canoo reported a net loss of $70.9 million, leaving about $5 million in cash. 

New debt and stock sales increased liquidity to around $61 million. Given the cash burn rate and current financials, Canoo will likely require additional funding soon.

On the date of publication, Chris MacDonald did not have (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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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