Canoo (GOEV) stock analysis as Tesla wannabe faces a cash squeeze

The electric vehicle industry is going through major headwinds this year amid heightened concerns about margins, growth, and balance sheets. Canoo (GOEV) stock price has already crashed by almost 70% this year and is hovering near its all-time low. Its market cap has plunged from over $4.7 billluin in 2021 to just $173 million today.

Canoo’s progress and risks

Canoo is not the only EV company whose market cap has tumbled in the past few years. Faraday Future, which has incinerated billions of dollars, is now valued at over $226 million. Tesla’s market cap peaked at more than $567 billion and has now plunged to $567 billion. The same is true for other EV companies like Rivian, Lucid Group, and VinFast.

Canoo has made a lot of progress in the past few years. It has narrowed its losses because of a series of cost cut measures. Its net loss stood at over $302 million in 2023 from the $487 million it lost a year earlier. This trend continued in the first quarter as its loss from operations dropped to $62 million from $81 million in the same quarter in 2023.

Canoo has delivered customized trucks to the USPS and it currently has a backlog of over $2.8 billion. $750 million of these orders have been confirmed and are from good companies like Walmart and Zeeba.

Also, the company received multiple incentives from Oklahoma, including a free trade agreement that will save it millions of dollars in the coming years. It has also sought customers internationally in places like Saudi Arabia and the UK. 

However, the biggest challenge for the Canoo stock price is that the company anticipates more losses in the future and it has a strained balance sheet. It ended the last quarter with cash and restricted cash of about $18.2 million.

These funds are not enough for a company that had a net loss of over $100 million in the first quarter. It also means that the firm will ultimately need to raise additional capital in the next few months. 

The question, therefore, is where this cash will come from. In most cases, as we have seen with AMC, the easiest approach is to raise cash by selling equity. This is a difficult thing for Canoo because of its smaller market cap. 

The company could also turn to the debt market. Again, this will be a tough proposition because of high interest rates and its high bankruptcy risks.

Canoo is also facing significant competition from EV manufacturers targeting corporate clients. Rivian is one of its biggest competitor now that it is no longer selling to Amazon exclusively. 

The other top competitors are niche companies like WorkHorse Group and Mullen Automotive, which has started selling its vehicles to customers. 

Canoo stock price forecast

GOEV chart by TradingView

The weekly chart shows that the GOEV share price has moved sideways in the past few months. As a result, its Average True Range (ATR) has collapsed, signaling that it has had no volatility in this period.

The stock was also consolidating at the 50-day and 100-day Exponential Moving Averages (EMA). This is a sign that bears are still in control for now.

On the positive side, this consolidation could be a sign that it has moved into the accumulation phase of the Wyckoff Method. Therefore, while the overall outlook is bearish, we can’t rule out a situation where the stock goes through a short squeeze. We have already seen similar squeezes among popular names like AMC and GameStop.

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