The chart of Canoo (NASDAQ:GOEV) stock looks like a bubble that has popped. GOEV stock lost its momentum as investors dumped the shares of speculative automakers. With no revenue in its last reported quarter and its expenses poised to climb, why should investors even consider buying Canoo’s shares?
GOEV Stock Weakened Ahead of the Company’s Q1 Results
For the first quarter, Canoo reported a 7 cent per share loss. It ended Q1 with $641.9 million of cash and equivalents. The company highlighted that it is taking pre-orders for all its vehicles and will soon reveal the price of its lifestyle vehicle. Canoo also noted that its is researching electric power in collaboration with the University of Wisconsin.
In Q1, Canoo announced that it would develop a pickup truck. Furthermore, the 28% increase in its headcount, which now consists of 544 employees and contractors, is a positive development.
Canoo will need those additional employees to advance its research and development efforts. Remarkably, 80% of its employees focus on R&D.
Investors are betting that Canoo can use its single EV platform to expand its product lineup. The company is developing a lifestyle vehicle which looks like a Volkswagon (OTC:VLKAY) bus from 1963. In Q4 of last year, as shown on the fourth slide here, it unveiled a multi-purpose delivery vehicle. Canoo expects to launch many more types of electric trucks going forward.
Ford Motor Undermines Canoo
The recent launch of Ford Motor’s (NYSE:F) F-150 electric vehicle has undermined Canoo. Ford received over 44,500 orders for its new EV in just 48 hours.
But as long as Canoo continues to have no EVs on the market, its losses will continue to climb. Canoo has to start booking revenue before the negative pressure on EV stocks intensifies.
Canoo is taking preorders for all of its vehicles. Their starting prices range from $34,750 to $49,950.
The automaker’s wide variety of EVs is positive and should enable it to attract many different types of customers. Canoo’s single platform is simple enough to support a high number of EVs.
Canoo is counting on a few of its technological advantages to differentiate itself from competing EV makers. Its electric motor has 24% greater peak power and 41% greater volumetric power density than competing offerings.
Additionally, Canoo is the first automaker to create a steer-by-wire system with a fully harmonized drive-by-wire system. Also, Canoo’s batteries are denser than those of its competitors’, and they have bi-directional charging, enabling them to provide power to households and businesses.
Ramping and Scaling Operations
After hiring mostly R&D staff, Canoo should be able to develop technological innovations, allowing it to further differentiate itself. Although its R&D costs and its sales, general, and administrative costs are rising, the company has enough cash to fund its operations for some time.
As an unproven EV maker, Canoo needs to ramp up its production, grow its revenue, and lower its costs over the next several quarters. Nio (NYSE:NIO) and XPeng (NYSE:XPEV) both sell tens of thousands of EVs each quarter.
And both firms are still losing money after year. Canoo also probably won’t report any profits in the near-term. Shareholders who overpaid for GOEV stock may want to consider selling the name at its current levels, enabling them to deduct the losses from their taxes. As speculators unload GOEV stock. the shares could keep falling.
Bears are all over the stock. Over 28% of the stock’s float is being sold short.
Only three analysts have ratings on GOEV stock. Their average price target is $10.33, according to Tipranks.
Meanwhile, Simplywall.st characterizes Canoo as financially healthy, but its growth outlook is modest, while the shares do not have a dividend and their valuation is not low. Investors are probably better off buying General Motors (NYSE:GM) due to its EV ambitions. GM also has modest debt levels and a forward price-earnings ratio of 8.6 times.
Canoo has no positive catalysts ahead. It has a compelling product lineup, but its competition has already heated up before it has begun producing its EVs. That could spell trouble for GOEV stock.
Chances are high that short-sellers will increase their bets against the company, causing the stock to drop further and rewarding those short sellers.
On the date of publication, Chris Lau 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.