As the MULN stock price gets oversold, is Mullen a bargain?

Mullen Automotive (NASDAQ: MULN) stock price bearish trend continued on Monday as concerns about the company continued. The stock is sitting at a record low of $0.70, meaning it has plunged by more than 90% this year and by 97% in the past 12 months. This decline and the fact that the stock is extremely cheap could attract some contrarian investors.

Mullen could still go bankrupt

Mullen Automotive share price has moved below $1 once again despite the recent reverse split. As a result, if the shares remain below this level, the company could be delisted from Nasdaq or be forced to reverse its stock once again.

There are two main risks facing Mullen Automotive investors. First, there are risks that the company will be forced to dilute its shareholders in the coming weeks or months. The most recent results published in March showed that the company has over $60.3 million in cash. 

While this is a good number, the company spends a lot of money per quarter. In the last quarter, the company’s operating loss came in at $67.9 million while the total loss came in at $114 million. Therefore, with the company is burning money fast and will need to raise capital soon.

This is important since Mullen is about to increase its cash burn as it starts manufacturing its vehicles. We have seen this several times in the past. Last week, as we wrote here, Lucid Motors, the Saudi Arabian-backed company raised $3 billion from investors. Further, many electric vehicles companies like Rivian, Arrival, and Lordstown Motors have raised cash.

The other big risk that Mullen Automotive faces is that it could go bankrupt if it fails to secure financing in the coming months. 

While Mullen Automotive has received some substantial orders, I believe that the next phase of manufacturing will be more difficult.

MULN stock price forecast

MULN chart by TradingView

The daily chart reveals that the Mullen Automotive stock price has been in a strong bearish trend in the past few months. It managed to cross the key support at $4.26 in March this year. This was an important level since it was the lowest level in December. 

The MULN share price has moved below the 50-day and 100-day exponential moving averages (EMA). Further, the Relative Strength Index (RSI) and the Stochastic Oscillator have moved below the oversold level.

Despite this, the shares will likely continue falling as sellers target the key support at $0.050 in the near term.