GOEV stock price: Canoo faces elevated dilution risks

Canoo (NASDAQ: GOEV) stock price has been in a freefall and is nearing its lowest point this year as the outlook for electric vehicles darkened. The shares were trading at $0.24 on Tuesday, a few points above the year-to-date low of $0.20. They have plunged by over 81% in the past 12 months, giving it a market cap of over $195 million.

Canoo challenges remain

Canoo is an EV company that is building companies, mostly for the delivery market. It has already received orders from companies like Walmart, Zebra, and Kingbee. In all, it has a backlog, and as its order book has jumped to over 67,000 vehicles. 

The challenge for Canoo is that it will cost money to fulfill these orders. It does not have these funds as the company ended the last quarter with just $8.3 million in cash and equivalents.

Canoo is also losing a lot of money even as it narrowed its losses. In its guidance, the company said that its adjusted EBITDA will be between minus $120 million and $140 million. It also expects that its capital expenditure for the second part of the year will be between $70 million and $100 million.

Therefore, here, we have a company with just $8.3 million in cash and spending over $70 million in capex. This means that it needs to raise more money to build and deliver its vehicles.

Canoo is not new in diluting its shareholders. According to TradingView, the company had about 30 million outstanding shares in 2019 and over 650 million today. This means that its original investors have seen their investments disappear in the past few years.

It is also worth noting that EV companies take time before they become profitable even after deliveries start. Lucid Motors, which has sold thousands of cars, is still losing more than $227k per car. Rivian is also losing $30k for every truck that it sells.

Lucid and Rivian have also been forced to raise capital to boost their balance sheet. Rivian raised $1.5 billion in October and $1.3 billion in March. Lucid is only surviving because of Saudi Arabia, its biggest investor.

Therefore, it is hard to recommend investing in Canoo unless it has enough capital in its balance sheet. While it has done well to reduce costs, this progress is not strong enough.

Canoo stock price forecast

GOEV chart by TradingView

Turning to the daily chart, we see that the GOEV share price has been in a strong bearish trend in the past few months. The stock has already plunged below the key support level at $0.4147, the lowest point in June and August. Also, it remains below the 50-day Exponential Moving Average (EMA).

The MACD has moved below the neutral point while the Relative Strength Index (RSI) has moved below 40. Therefore, things are not looking good for the GOEV share price. I suspect that it will drop to the key support at $0.20.