Canoo stock price forecast: GOEV faces 1 key risk but don’t short it

By:
on May 27, 2024
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  • Canoo, a small EV company, has made a lot of progress in the past few years.
  • The company has secured large orders and started to ship to customers.
  • The management estimates that its annual revenue will be over $100 million in 2024.

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Canoo (NASDAQ: GOEV) stock price has imploded this year even as the company made progress on its development. It has plunged by almost 60% this year even as the S&P 500 and Nasdaq 100 indices surged to their all-time highs. Also, it has crashed by almost 100% in the past five years, making it one of the worst-performing companies.

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Cash is Canoo’s biggest challenge

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Canoo, a well-known company in the utility electric vehicle industry, has made a lot of progress. It has won orders worth over $3 billion from leading companies and organisations like Walmart, USPS,  and NASA. 

The company has also completed the research process and has now started to ship vehicles to customers like USPS. Further, it has continued to reduce its losses and has received the Foreign Trade Zone (FTZ) from the Oklahoma City Government. 

Most importantly, analysts expect that the company’s revenue growth will accelerate. The average revenue estimate for the year is $100 million followed by over $592 million in 2025. This growth will happen as the company accelerates its vehicle deliveries to its corporate customers. 

Cash is the biggest challenge that Canoo faces. It ended the last quarter with cash and cash equivalents of just $18.2 million. This is a tiny amount of money for a company that had an adjusted net loss of over $57.3 million in the last quarter.

Unfortunately, Canoo has no easy way out because its stock has a market cap of about $158 million. Also, with interest rates sitting at the highest point in over two decades, debt financing will not be an easy process.

History shows that most EV companies generate substantial losses after starting to ship their vehicles. For example, Lucid Motors had over $595 million in annual revenue in 2023 and had a net loss over $2.8 billion.

Rivian, on the other hand, made over $4.4 billion in revenue in 2023 and a net loss of over $5.4 billion. These companies have already raised billions of dollars since they started shipping their vehicles a few months ago.

Analysts expect that Canoo will continue making losses in the coming years. The average estimate is that its loss per share will improve to 4 cents this year from $12.20 a year earlier. It will then lose 2.2 cents per share in 2025. 

The other risk to consider is that most new EV companies go through expensive recalls. Nikola had to spend millions of dollars repairing its trucks. The same is true with companies like Lucid, VinFast, and Nikola. It is unclear whether Canoo, with its weak balance sheet, would be able to deal with such recalls.

Canoo stock price forecast

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GOEV chart by TradingView

Turning to the daily chart, we see that the GOEV share price has been in a strong sell-off. Recently, however, it has moved sideways between $3 and $4 and is consolidating at the 50-day and 25-day Exponential Moving Averages (EMA). 

The stock has also formed a falling wedge chart pattern, a popular bullish sign, especially now that it is nearing its confluence level. Therefore, while the stock is risky, shorting it is riskier because it could go through a short squeeze. Besides, the stock has a high short interest of about 23%. 

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