Canoo (GOEV) stock slumped in the first half: will the tide turn?

Canoo (NASDAQ: GOEV) stock price has stabilized in the past few weeks as investors focused on key developments by the company. It has risen by almost 5% in the past 30 days, giving it a market valuation of over $143 million. Still, it has crashed by almost 82% in the past 12 months and by almost 100% in the past five years. 

Some progress but risks remain

Canoo, like other EV companies, has stabilised recently. Tesla shares have risen by over 60% from the lowest point this year. Other EV companies like Rivian, Lucid, and Nio have stopped falling.

Canoo’s stock rose after the company was added in the Russell 3000, Russell 2000, and the Russell Microcap indexes. That inclusion is a positive thing since it will be acquired by ETFs that track these funds. Russell indices have over $10 trillion in assets. 

Canoo’s business has done well in the past few months. It has received a Foreign Trade Zone (FTZ) certification in Oklahoma, a move that will give it substantial savings. In June, the company received the first two tranches of manufacturing assets from Arrival, a British company that went out of business. 

Canoo has also received substantial orders from commercial fleets, government, and the millitary. Some of the companies that have placed orders in Canoo are Walmart, USPS, and NASA. In all, it has confirmed orders worth over $700 million and a total backlog of over $3 billion.

Canoo is a different company from other EV names like Tesla and Lucid in that it focuses on utility vehicles that are ideal for companies and other organisations. Its closest competitors are companies like Workhorse Group and Rivian, which manufacture vehicles for fleets. 

Canoo has also reduced its expenses and losses. In its most recent financial results, its loss from operations improved to $62.6 million from $81.52 million in the same period in 2023. However, its net loss jumped to over $110 million, mostly because of a loss on fair value of its convertible debt. 

Canoo has also sought to expand its business geographically. It recently entered the $30 billion Saudi Arabian market, where it hopes to become a leading provider of utility vehicles. It has also sought to enter the UK market.

Key challenges remain

Canoo’s biggest challenge is that its balance sheet may not support its growth trend. It ended the last quarter with just $3.6 million in cash and equivalents. It also has over $3.9 million in restricted cash, which is highly inadequate for a company that had a net loss of over $110 million in the last quarter.

All this means that Canoo will likely be highly dilutive in the future. In June, the company filed to sell almost 20 million shares in a bid to boost its balance sheet. In my estimation, the company needs hundreds of millions of dollars to execute its strategy well. It is unclear where these funds will come from.

Canoo stock price analysis

GOEV chart by TradingView

On the daily chart, we see that the GOEV share price had a tough performance in the first half of the year. It dropped by over 60%, making it one of the worst-performing companies in the industry. It also underperformed key indices like the S&P 500 and Nasdaq 100 indices.

The Canoo stock price has remained below the 50-day moving average and found a strong support at around $1.23. It has also formed a falling wedge chart pattern, which has moved to the confluence zone. 

In most cases, the wedge pattern is a popular bullish sign in the market. Therefore, while the company faces some bankruptcy risks, there is a likelihood that it will have a short squeeze in the second half of the year. If this happens, it could rise to over $4. On the flip side, there is also a risk that it could drop and retest the year-to-date low of $1.25.