Is It Time To Bail Out Of Canoo, Or Scoop It Up?
Canoo (NASDAQ: GOEV) is one of the hot up-and-comers in the EV market having gone SPAC late last year and on track to begin deliveries in 2022. In fact, if the company’s FQ4 report can be believed it has achieved several milestones that not only keep the company on track but have accelerated the shift from engineering to production. Among them are the filing of 45 new patents and design registrations that help secure the company’s footing in the industry if nothing else. The problem with share prices is the news is too little for a market hyped up on EV. The EV market is growing by leaps and bounds and the outlook for future growth is robust and that is what investors wanted to see.
Canoo Falls To Record Low
Shares of Canoo are down nearly 25% on the lackluster Q4 results and trading at a record low. When we say record low this is the second-lowest level since the SPAC went public, not just since Canoo went public, so there is a fair amount of bearish sentiment in the market. The company was not expected to produce any revenue and it didn’t, that wasn’t the problem, the problem is the company’s operating loss widened on a YOY basis and the guidance isn’t fabulous. The company is expecting losses to reaccelerate into the $45 to $50 million range in the Q1 period. The only good news is that the -$42.5 million in consolidated operating losses is down from the previous quarter and will eventually lead to some revenue.
What investors need to remember when thinking about Canoo is this company has a very long-term vision. They are expecting EV to capture upwards of 75% of the total light-vehicle market within the next 50 years or so and are using that as their focus. the long-term needs of the EV market. The company’s platform has been described as an EV skateboard that any type of vehicle configuration can be attached to, a design that is supposed to enhance flexibility and allow the company to easily evolve with the EV market as it matures.
"Globally there are approximately 1.5 billion light vehicles and we believe that 80% of those will be replaced by EVs over the next 4 to 5 car generations. Canoo's technology gives us a blank canvas to reimagine how the EV fits into our changing auto ecosystem. We have focused on a use case approach to generate the largest possible total addressable market ('TAM') based off a common platform, our MPP1," said Tony Aquila, Canoo's Executive Chairman. "We are building vehicles that are not burdened by legacy constraints and developing technologies and functional designs to build EVs for everyone. We believe we are the first OEM that is looking at the full lifecycle of the vehicle and building in multiple revenue touchpoints."
The Analysts Love EV And Are Fond OF GOEV
So far there are only two analysts on board with Canoo but we think that is going to change, especially now that shares have gone into the bargain-basement. The consensus target of the two is $23 or about 150% upside from today’s trading level. In our view, this is a low estimate but that is assuming the company is able to begin production on schedule. With over $702 million in cash and marketable securities, the company should be able to sustain itself until then. As for the stock, shares are testing major support as we prepare this piece, if share prices can’t bounce back from here this market could fall down into the penny stock range.