Canoo stock price is slumping: August 14 will be key for GOEV

Canoo (GOEV) stock price has continued in a strong freefall this year as concerns about the Electric Vehicle (EV) companies continued. It has dropped by almost 70% this year and by almost 90% in the past 12 months, giving it a market cap of over $143 million.

Other EV companies have also been in a downtrend, with Tesla stock trading at $207, its lowest point since July 1st. Tesla stock has dropped by almost 6% in the pre-market session while Rivian fell by almost 9%. Other EV stocks like Lucid Group, Mullen Automotive, and Nio have also retreated.

Canoo has executed well but chances remain

Canoo is one of the top Tesla wannabes that seeks to become one of the biggest player in the utility industry. The company has received vast orders from the likes of USPS, NASA, Walmart, and Zeeba.

According to the management, the company has orders worth over $3 billion, with $750 million of them being the confirmed ones. Zeeba has placed an order of 3000 vehicles while Walmart has an order of 4,500 vehicles. In July, Go2 Delivery placed an order of 85 vehicles.

Canoo has room to grow its dominate the utility market. In it, it will compete with the likes of Workhorse Group and Rivian, which sells a highly popular commercial van. While this van was initially sold to just Amazon, the company has started selling it to other firms.

This is a huge market considering that companies like UPS have over 85,000 vehicles in the US and over 100,000 globally. FedEx has over 87,000 vehicles while other big players in retail and deliveries have more of them.

This is an industry that is expected to grow as these companies transition to electric vehicles, a move that will continue in the next few years.

Meanwhile, Canoo has made more achievements in the past few months. It recently received incentives from Oklahoma state and the Oklahoma Foreign Trade Zone (FTZ). It has also entered a partnership with the Department of Defense (DoD).

Potential risks remain

Canoo stock has therefore crashed because of the rising concerns about its business and its balance sheet.

One of the biggest issues is that it has raised over $400 million from Yorkville that have boosted the number of outstanding shares to over 66 million from 1.3 million in 2019. Most of these funds – $622 million – were raised since January 2022.

This dilution will likely continue because of the current state of the balance sheet. In its last financial report, the company said that it had over $18.2 million in cash and short-term investments.

These are small sums of money for a company that generated over $110 million in losses in the first quarter. Its adjusted EBITDA during the quarter was over $48.3 million while the net cash used in operating and investing activities stood at over $47.5 million and $4.9 million.

Past experience with other EV companies shows that most of them make losses for many years after starting to deliver their vehicles. For example, Nio, a large Chinese EV company, has been making losses worth millions of dollars even though it started deliveries in 2018.

Similarly, companies like Lucid Group and Rivian are still losing millions of dollars each quarter. Even the big manufacturing companies like Toyota, General Motors, and Ford are making losses in their EV businesses.

This means that Canoo too will go through this baptism by fire for a long time. As a result, it will likely need more cash from investors, a move that will lead to more dilution.

August 14 will be key

The next important catalyst for the GOEV stock price will happen on August 14 when the company will publish its second-quarter results. In this, investors will not focus on its bottom line, which it does not have. Instead, they will focus on its losses and balance sheet.

Canoo has done well to reduce its losses in the past few quarters. Its adjusted EBITDA was $48.3 million in the first quarter, an improvement from the $68 million it lost a year earlier. The GOEV stock will also react to the company’s balance sheet and its strategy to raise cash.

Canoo stock price forecast

In my last article on Canoo, I warned that it was at risk of more downside, which has happened. It has now moved below the key support at $2. Also, the stock has moved to the lower side of the symmetrical triangle pattern.

It has also moved below the 50-day and 25-day Exponential Moving Averages (EMA) while the Relative Strength Index (RSI) has pointed downwards. Therefore, the path of the least resistance for the stock is downwards, with the next point to watch being at $1.50. Still, a rebound is still possible if it publishes strong metrics on August 13th.

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