After a sharp pullback, shares of Canoo (NASDAQ:GOEV) is looking like an enticing opportunity. Now I know what you are thinking. Is it the right time to invest in GOEV stock, yet another special purpose acquisition company (SPAC) focused on the electric vehicle space?
I get your skepticism. Several pure-play EV stocks came in with a bang and have since petered out. However, what makes Canoo different is that it’s not a traditional EV company. Instead, the company is applying the subscription or Software-as-a-Service model to electric vehicles.
Think of it as Netflix (NASDAQ:NFLX) but for the EV sector. Canoo’s scalable electric vehicle platform, or “skateboard,” combines more of the car’s electronics, allowing for greater flexibility in cabin design. Canoo’s proprietary electric car skateboard platform is reportedly one of the main reasons why Apple (NASDAQ:AAPL) is interested in the company.
Last year, Hyundai Motor (OTCMKTS:HYMTF) tapped Canoo to develop an EV platform based on Canoo’s proprietary skateboard design for the upcoming Hyundai and Kia models. Such large-scale institutional interest is a clear indicator of confidence in the company’s prospects. Read on to understand why you should share in that enthusiasm.
GOEV Stock Is Reasonably Priced for Green Future
EVs had a banner year in 2020, and the momentum is not letting up. Tesla’s (NASDAQ:TSLA) market capitalization blew past $500 billion in 2020. It’s now worth as much as the nine largest car companies globally combined, despite selling a small fraction of the volume of cars that they do.
There are several factors why we are experiencing this phenomenon. The novel coronavirus pandemic has led to increased calls from environmentalists to limit the use of gas guzzlers and replace them with EVs.
Separately, young investors are driving up market caps through trading on the Robinhood app. Although financial experts dissuade others from investing based on trends seen on this platform, you cannot discount the millions using it to perform real-time trades.
Debuts through the SPAC route, which don’t involve the same rigorous SEC process as a traditional IPO, only adds to the anxiety. You don’t have to look further than the Nikola (NASDAQ:NKLA) fiasco to understand why investors are gun-shy.
However, these issues, happily, don’t plague Canoo. Founded in late 2017, the company wants to manufacture commercial electric vehicles for a subscription-based model. Canoo is betting that ride-sharing vehicles in the future will look more like mobile living rooms than traditional cars.
“Think about the fact that you have two or three million cars driving around the U.S. on ride-hailing networks, and none of them were designed for ride-hailing,” said James Cox, Canoo’s head of product technology, who previously served as global head of product operations at Uber (NYSE:UBER).
In addition to its unique design, you have a small group that split out from struggling EV startup Faraday Future, including multiple former BMW executives, heading the company. That should help you sleep better at night once you’ve established a small position in GOEV stock.
EV Names Are Inherently Volatile
Roth Capital Partners initiated coverage of GOEV stock with “buy” rating and a $30 price target. Since that Dec. 16 call, Canoo shares have pulled to just above $15 share, implying nearly 100% upside from here. Roth is alone in its coverage.
You have to take any estimates on EVs with a grain of salt. Investing in the space comes with a lot of inherent volatility. But I am bullish because of the advantages of Canoo’s skateboard platform and zero-commitment subscription model.
Consumers’ discretionary income remains down. The 2020 Tesla Model X starts at $79,990, and a Tesla Model Y will push you back by $41,990. Hence, it’s not like EVs are within reach of everyone out there looking to make the shift. Canoo’s business model helps in providing accessibility to a wider base of customers.
We live in a world where Elon Musk is the world’s richest man, and Chinese EV maker NIO (NYSE:NIO) is worth more than General Motors (NYSE:GM). Everyone is looking for the exact moment when the EV bubble will burst. We can’t say for sure when that will happen. However, the best way to mitigate against that risk is to load up on stocks that offer an exciting long term story. GOEV stock is an excellent opportunity in that respect.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.