MULN stock price forecast: Is Mullen a good buy in May?

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on Jun 3, 2024
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  • Mullen Automotive’s stock has been in a freefall for years.
  • The company recently secured funds from investors as its cash burn increases.
  • There are concerns about its vehicle demand as the EV industry slows.

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Mullen Automotive (NASDAQ: MULN) stock price has remained under intense pressure as concerns about the company and the electric vehicle industry continued. It plunged by more than 12% on Monday even as other meme companies like GameStop and AMC Entertainment surged.

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Balance sheet issues remain

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Mullen Automotive has made a lot of progress in the past 12 months. It has already secured many orders from Randy Marion, one of the biggest dealerships in the United States. Some of the vehicles it is already selling are Mullen One and Mullen Three, which are usually bought by small businesses.

Mullen also received an order of 40 Mullen-Go urban delivery vehicles from Antidoto, a Swiss company that focuses on food deliveries. It is one of Mullen’s venture outside the United States.

Still, the company’s core challenge is that its balance sheet is a bit strained. The company ended the last quarter with just $22 million in cash and short-term investments. It had over $214 million in cash in its second quarter of 2023. 

This balance sheet means that the company will need to raise cash because of the amount it is incinerating. It had a net loss of over $132 million in the first-quarter even as it continued delivering vehicles. 

Mullen Automotive’s total net loss in the past five quarters totalled over $787 million. While vehicle deliveries will help it to offset these losses, history from other EV companies like Nio, Lucid Motors, and Rivian shows that they continue to lose money for a few years after starting their deliveries.

Mullen has already started to boost its balance sheet. In May, the company reached a $100 million financing commitment from a family office. It also sold $50 million in senior secured convertible note to a group of investors. These funds will help it run its operations without needing to raise capital for a year. 

In addition to its balance sheet, it is unclear whether there is enough demand for its vehicles. While these vehicles are not all that expensive, I believe that many customers still prefer diesel trucks. 

Mullen Automotive stock price forecast

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MULN chart by TradingView

The MULN share price has been in a freefall for a long time, as I wrote here and here. Its attempts to recover have found strong resistance as short-sellers came in. Its most recent attempt happened between April and May as it soared to $7.66. 

The stock has remained below the 50-day and 15-day Exponential Moving Averages (EMA). It has also slumped below the descending trendline shown in black. Therefore, the outlook for the stock is bearish, with the next support to watch being at $2.30, its lowest point in April.

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