Canoo stock price has a huge backlog but headwinds remain

Canoo (NASDAQ: GOEV) stock price is sitting slightly above its record low as investors assess the company’s future. The shares were trading at $0.4678 on Wednesday, a few points above the all-time low of $0.4164. They have slipped by over 76% in the past 12 months and 62% this year.

Headwinds and Tailwinds

Canoo is an American company that aims to be a leading player in the electric vehicle industry. The firm’s goal is to build quality utility vehicles mostly for companies and other organisations. In the past few years, the firm has received substantial pre-orders from companies like Walmart, Zeeba, and Kingbee.

In total, the company has a huge order book worth over $3 billion. $750 million of these orders are binding in nature, which is an added advantage. These committed orders are for 18,000 vehicles. The company has also started slowing down on the pre-orders it is taking.

Canoo is now working on the manufacturing processs in its plant in Oklahoma. It hopes that this plant will have an annua run rate of 20,000 vehicles. 

Therefore, Canoo is a good company from the demand side. The challenge, however, is that the company needs additional capital as it aims to scale its operations. Raising capital for an unprofitable company in this environment will not be easy.

Canoo raised $132 million in Q2 through a combination of convertible debentures, warrants, and PIPEs. It then ended the quarter with $5 million of cash and equivalets as it used $129.5 million in operations in the first half of the year. 

Further, the company believes that its adjusted EBITDA for the second half of the year will be minus $120 million – $140 million. Therefore, there is a likelihood that the company will need to raise capital to fund this growth.  

This means that dilution will continue going forward. Canoo had 235 million outstanding shares in 2020. Today, it has over 634 million shares. 

Canoo stock price forecast

The daily chart shows that the GOEV stock price has been in a strong bearish trend for a while. This sell-off eased slightly after the company’s encouraging earnings. The shares are slightly above the key support at $0.4164, the lowest level this year. It has moved slightly below the descending trendline shown in red. This trendline connects the highest swings since May.

Therefore, I still maintain a bearish outlook for the stock, with the next level to watch being at $0.3500. This view will be confirmed if the price moves below $0.4164.