Canoo stock price sits at a key support: Is GOEV a buy now?

Canoo (NASDAQ: GOEV) stock price is hovering near its record low as concerns about the company continued. Shares of the electric vehicle company crashed to a low of $0.5500, which is slightly above its record low of $0.4990. The company now has a market cap of over $277 million.

GOEV tumbled after its earnings

Canoo share price has been in a strong bearish trend as concerns about the company and its cash burn continues. The most recent results showed that the company’s business was struggling as the losses mount. 

In a statement, the company said that its net loss plunged to $90.7 million in the first quarter. It had lost $80.2 million in the fourth quarter and over $117 million in the previous quarter. And there are no signs that the company will become profitable any time soon.

At the same time, there are concerns that the company does not have enough resources to continue funding its projects. Its total cash and short-term investments crashed from over $40 million in the December quarter to just $8.8 million in Q1. Accrued expenses rose to $39.9 million.

Canoo, like other companies, will need more money to fund its manufacturing plants. As the management admitted recently, manufacturing is hard. In the recent earnings call, the CEO said:

“Bringing manufacturing is hard. We recognize it. We are embracing it and we know we do not have all the answers… We are still fighting some legacy matters, primarily in the areas of harmonizing our supply chain for production.”

Ramping up production can be highly expensive process as we have seen with over electric vehicle companies. Just last week, Lucid Motors decided to dilute shareholders by raising $3 billion in a share sale. Rivian, on the other hand, is on the verge of being kicked off the Nasdaq 100 index as its cash burn jumped.

Therefore, while Canoo has an order book worth $2.8 billion, filling it with limited cash will be difficult and costly. It will also likely lead to more shareholder dilution in the near term.

Canoo stock price forecast

GOEV chart by TradingView

The 4H chart shows that the GOEV stock price has been in a strong bearish trend in the past few months. Now, the stock is hovering near the important support level at $0.4990, its lowest level on record. As expected, the shares have dropped below the 25-day and 50-day exponential moving averages (EMA).

Therefore, the outlook of the stock is now neutral with a bearish bias. More downside will be confirmed if the price moves below the year-to-date low of $0.4990. If this happens, the next level to watch will be at $0.45.