Canoo (GOEV) stock price analysis: buy, sell, hold?

Canoo (NASDAQ: GOEV) stock price has remained under intense pressure in the past few weeks as investors remain concerned about the company’s revenue growth and balance sheet. The stock was trading at $2.05 on Tuesday, down by over 70% from its highest level this year. It has slumped by almost 100% from its all-time high.

Good company but challenges remain

Canoo is a great electric vehicle company that focuses on corporate clients. Its vehicles are aimed to provide utility to companies in most industries like logistics and retail. It is also targeting government agencies like NASA and the Department of Defense.

The company has a large total addressable market (TAM) as these organisations work towards achieving their net zero goals. For example, Amazon has ordered over 100k delivery vehicles from Rivian, one of the biggest players in the EV industry. 

Canoo has received orders worth over $3 billion from companies like Walmart, Zeeba, USPS, and NASA. $750 million of these orders have contractual agreements, which is a good deal. The other positive is that the company has started to deliver its vehicles to customers.

However, the biggest challenge that Canoo faces is that its balance sheet is a bit strained at a time when its cash burn is increasing. Canoo’s net loss for the last quarter came in at over $57.3 million while its loss per share came in at $1.13. 

This loss-making streak will continue for a while as we have seen with other EV companies that have started to deliver their vehicles. For example, Rivian and Lucid Motors have lost substantial sums of money in the past few years.

At the same time, Canoo’s balance sheet is not all that strong. The company ended the last quarter with $32.39 million in current assets. Its available cash in this was less than $8 million, meaning that the company will need to raise cash this year. In fact, the company has raised going concern risks in its statements to investors.

Therefore, the challenge for its management is where to access fresh capital to fund its manufacturing. One way would be to offer new shares, which is not realistic since Canoo’s market cap stands at $141 million. Another option would be to issue convertible debt as Faraday Future did recently.

Canoo stock price analysis

GOEV chart by TradingView

The daily chart reveals that the GOEV share price has been in a strong freefall after peaking in 2021. Most recently, the stock has found a strong support at the psychological level at $2.0, where it has failed to move below.

Canoo has remained below the 50-day and 100-day Exponential Moving Averages (EMA). Most importantly, it has formed a falling wedge chart pattern, which is a popular bullish sign. 

Therefore, while Canoo is still in trouble, we can’t rule out a situation where it forms a strong bullish breakout as it goes through a short squeeze in the coming weeks. If this happens, the next point to watch will be at $4. The alternative scenario is where it drops and hits the lower side of the wedge at $0.50.