Los Angeles-based electric vehicle startup Canoo (NASDAQ:GOEV) began trading on Dec. 22 after completing its SPAC (special purpose acquisition company) merger with Hennessy Capital Acquisition IV. GOEV stock opened at $22.75. It has since lost 38% of its value. And that has a lot of investors paying attention.

Like many EV stocks, Canoo’s share price has gotten knocked around as we’ve entered into 2021. Off considerably from its first-day high, investors are weighing their options with GOEV.

So is it a buy at $15 and change? Or can it be had for less? Let’s consider both arguments.

GOEV Stock Has Bottomed

Thanks to the Jan. 4 selloff, Canoo’s share price hit a post-IPO low of $12, exactly where CNBC’s Jim Cramer suggests you should be buying the EV stock.

“I think you should let Luminar go lower — lots of insiders potentially ringing the register here — but I’d be a buyer of Canoo down here at $12,” Cramer said on Jan. 4.

Now, the one thing I’ve learned about predictions, including my own, is that they’re generally not worth the paper they’re written on. That’s because the markets have a mind of their own. Nobody really knows where a stock’s headed in the short term.

Cramer feels as though $12 is a much better entry point for Canoo than $22.75. And he’s not wrong.

However, GOEV stock has bounced off the bottom, closing up at $15. Where it finishes is anybody’s guess, but right now, things are looking good.

So, when you consider that Canoo had $607 million in net cash post-combination, that works out to $2.58 per share based on 235.7 million outstanding on Dec. 21, 2020. That’s a multiple of 5.4 times cash, which doesn’t consider any of Canoo’s assets.

On pages 30 and 31 of Hennessy’s Dec. 4 prospectus, it lays out some of Canoo’s financial numbers.

As of Sep. 30, 2020, Canoo’s assets were $197.6 million, up from $72.1 million at the end of 2019, while its working capital was $139.2 million, up from $20.9 million at the end of 2019.

In terms of revenue, it had sales of $2.6 million through the first nine months of the year. More importantly, its loss from operations through the first nine months was $72.1 million, almost half the $136.3 million loss in the same period a year earlier.

It’s a sign it’s been preserving cash until it can deliver its first business-to-consumer lifestyle vehicles in second-quarter 2022, a business-to-business delivery vehicle in 2023, and its B2C sport vehicle in 2025.

With 13 driving prototypes available and no plans to do the manufacturing in-house, the capital requirements to get to 2022 should be fairly reasonable. I could see it making it to a 2022 launch without having to hit up the debt and equity markets very frequently over the next 24 months.

That’s a good thing if you’re worried about future dilution.

Its Share Price Is Like a Leaky Canoo

Like most EV startups that have gone public through a SPAC combination in 2020, investors are expected to suspend reality, envisioning a time when Canoo is generating $2.34 billion in annual revenue. That year is 2025, a full 60 months from today.

Yet, it currently has an enterprise value of $2.7 billion (market cap of $3.3 billion less $607 million cash) or $11.46 a share, 24% below where it’s trading, and less than the entry point suggested by Jim Cramer.

The company gets to this valuation by discounting its 2025 implied enterprise value of between $9.4 billion and $4.7 billion based on its $2.34 billion in sales.

To differentiate itself from all the EV competition, Canoo is relying on two things.

First, it will utilize a “skateboard” platform that provides its users with a spacious interior and a smooth, dynamic ride. The best of both worlds that InvestorPlace’s Luke Lango makes it ideal for a world where self-driving is the norm.

The second differentiator is it’s going with a subscription model. You won’t own your car or lease it; you’ll have a monthly subscription like your New York Times digital subscription. It’s different; I’ll give it that.

InvestorPlace contributor Vince Martin feels it might be too much, too fast.

“Canoo is trying to carve its own path. To some investors, that’s the core of the bull case. But asking for a start-up to deliver that many changes that quickly seems like an awfully big risk, too,” Martin wrote on Dec. 30.

He makes a very compelling argument.

To Buy or Not to Buy?

Go big or go home, right? Maybe.

This is my first chance to write about Canoo. While I think its vehicles are ugly as sin, I do like the financial restraint it’s shown over the past 12 months as it readies itself for actual production.

I wouldn’t recommend you buy this stock if it’s for your retirement plan — although some would argue that if you’re not retiring for 30 to 40 years, it might be the perfect bet — but if you’ve got some fun money, I don’t think it would hurt to buy at $15 and change.

I’ll continue to watch Canoo’s progress with interest.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.