From charged up to unplugged with Wall Street; it’s not unusual price action in many EV stocks these days. But for Canoo (NASDAQ:GOEV) stock, there’s mounting evidence a detour in bullish investor behavior is a buying opportunity.
Let’s look at what’s happening off and on the price chart, then propose a risk-adjusted position aligned with those findings.
Direct listings through blank check or special purpose acquisition companies (SPACs) enjoyed a banner 2020. And electric vehicle stocks were a hugely popular vehicle in this alternative route to a traditional initial public offering. Consider Nikola (NASDAQ:NKLA), Workhorse (NASDAQ:WKHS), Switchback Energy (NYSE:SBE), Fisker (NYSE:FSR), Blink Charging (NASDAQ:BLNK), among others.
The list goes on and on for this high-octane group of SPAC EV stocks that have entered the market. Now and as of late December it also includes GOEV.
So, who and what makes GOEV stand apart from the crowd? GOEV began trading on Dec. 22 after trading under Hennessy Capital and ticker HCAC after a reverse merger was announced in August. What GOEV brings to the table is its “modular skateboard platform for its vehicle development.” Apparently, it makes for a ride that’s like being in a spaceship if it had wheels. Cool, right?
What’s also different is CEO Ulrich Kranz’ vision for its vehicle. Aside from its sustainability, GOEV’s electric van may feel more like entering a cozy loft rather than a van. Canoo has rethought what a vehicle should look like. In fact, its blank canvas customization options even includes a miniature plant pot or folder-style storage to make your spaceship with wheels your own.
There’s more too. Also gone is how a consumer gets behind the wheel of their new ride. GOEV offers an innovative subscription model to Canoo rather than a car purchase. And with that agreement are stress assurances of maintenance, insurance, charging and vehicle registration. And if they’re to be believed, the company is doing this in a way which reduces the total cost of vehicle ownership.
Now there may be even more to the GOEV story as well. Apple (NASDAQ:AAPL) and auto manufacturer Hyundai (OTCMKTS:HYMTF) announced the two companies are exploring a self-driving electric vehicle partnership according to Bloomberg. Talks are early stage at best, but GOEV does have a partnership with Hyundai. And Canoo’s platform could theoretically work in a future Apple Car.
GOEV Stock Weekly Price Chart
Everyone wants to own a 10 bagger, right? If you’re in agreement, you’re far from alone. The problem with going after 10 baggers as a strategy is that for every Apple there are hundreds of companies which sound like the real deal after a tire kicking, but which fail to live up to the promise. It gets worse though and it could as well for GOEV stock.
Most of those stocks don’t simply languish and allow an easy out with modest losses. They wind up giving back the entirety of the gains tied to a blip in time when investors though they had a firm grasp of the market’s next, next big thing. Worse and given a sufficient holding period, quite often it gets even uglier for shareholders who decided to stay the course.
Bottom line, as much as most of us may think we know about GOEV or like about GOEV, which might now also include today’s weekly bottoming confirmation on the price chart, it’s a highly speculative stock. Exposure to shares should be executed with knowledge the odds don’t favor long-term success.
With caveats in place and for investors looking to allocate a bit of risk capital towards Canoo, I’d suggest an out-of-the-money vertical using call contracts. This type of spread allows unmatched bang for the buck ‘if’ GOEV’s begins to trade higher again. At the same time, the position’s defined and reduced cost structure ensures not having to stress about future adverse conditions on the price chart while trying to minimize losses.
One GOEV stock vertical that aligns itself nicely with Wall Street’s destructive siren song serenade of the past couple weeks through today’s bullish weekly hammer signal is the May $17.50/$25 bull call spread.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
