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Canoo Stock Remains Too Risky a Bet on an Unproven EV Player

Maybe I’m jumping to conclusions. But why not? Jumping is fun, especially when the company’s name is Canoo Inc. (NASDAQ:GOEV). Now just picture me here, oddball stock picker that I am. “Canooooooooo!” Man, that’s fun to say. And as for GOEV stock, look at that ticker. “Go-EV” is a clever endorsement of the electric vehicle sector to which Canooooooooo, uh Canoo, belongs.

A Canoo MPDV being loaded with small shipping containers

Source: Canoo media

But fun is even better for investors when it’s fun and profit. In the case of GOEV stock, a strong case needs to be made one way or the other because the EV sector is nothing if not wildly speculative.

So perhaps this small-cap company (valued at just above $2.6 billion) run by two former BMW executives amounts to an investment bargain beyond compare. It’s priced attractively at roughly $11 a share.

On the other hand, this landscape has attracted charlatans and dubious wannabes. The nefarious Trevor Milton, co-founder of Nikola Corp. (NASDAQ:NKLA), was forced out after admitting he’d faked video footage of one of his prototypes in action.

Then you have solid-state battery maker QuantumScape Corp. (NYSE:QS). It faces a bevy of class-action lawsuits over accusations that it misled shareholders in regard to the progress of its technology.

As trouble in EV land is no fun at all, let’s see where GOEV stock finds itself situated.

GOEV Stock, Like a Sinking Canoe

The first bit of backstory I have to share is disheartening. GOEV stock started trading in December after Hennessy Capital Acquisition Corp. performed a reverse merger to pump an estimated $600 million into the new company.

Hennessy Capital was a special purpose acquisition company (SPAC). Now by my count, about 3,892 EV companies went public in 2020 thanks to SPACs. Well, maybe not that many. But every time I write about this sector, I discover another SPAC I had no idea existed.

Certainly, a lion’s share of newly-traded EV companies have arrived at Wall Street via SPAC deals, but since hitting the NASDAQ at $22.82 per share, GOEV stock is down. Way down. By more than half, in fact. This brings us to Virgin Galactic Holdings Inc. (NYSE:SPCE). Over the last month, it has also shed more than half its value.

As I’ve very recently written, SPAC controversy has now surfaced in mainstream media news. The major culprit, SPAC pioneer Chamath Palihapitiya, sold all his shares of Virgin Galactic after taking the company public.

The move not only smacks of take-the-money-and-run, it also raises questions about whether this SPAC, and many others, are mere playthings by which billionaires can make out and make off.

Waiting for Apple to Bite

I’m not sure whether Palihapitiya gives a damn that when news of his sale came to light in the first week of March, SPCE stock plunged 10%. He Tweeted about his sale with — get this — a sad emoji. If I’d lost as much money as many shareholders did, I’d consider this a facetious insult from a flippant, oblivious billionaire. But … I digress.

What’s driving the loss of investor confidence in GOEV stock? Well, you can only dangle an apple for so long, as in the rumor that Apple Inc. (NASDAQ:AAPL) wants to buy Canoo. Gossip that involves the world’s most valuable company is worth considering, but talk being as cheap as it is you can’t take it to the bank the same way a SPAC billionaire can.

This leaves us with what Canoo actually has going for it. To that end, it is betting on what it calls a “unique subscription model” that allows users to pay for their bold, bulbous vehicles as they go. Well, then. I’d use another U-word, as in “unproven subscription model.”

Here, I suppose that if a fairly clever EV overlord like Elon Musk doesn’t consider this paradigm worth his time, then its viability is questionable.

Keep It in Park

When EV players don’t have solid sales numbers in the rearview, what you have left is a fuzzy dice roll.

Companies such as Fisker Inc. (NYSE:FSR) and Lordstown Motors Group (NASDAQ:RIDE) are betting on their muscular products to stand out once they roll off the assembly line, but FSR stock is up 50% over the last six months while RIDE stock has skidded by close to 20%.

So the ultimate confidence builder where GOEV stock is concerned equates to sales figures (or pay-as-you-go figures) that increase month over month and year over year. Without that, you need to rely on less tangible barometers, ranging from reliable (analyst projections) to irrational (investor adrenaline).

The latter is hardly dependable fuel for an EV company, and the former is the apple of only one analyst’s eye. They project a 12-month price target of $30, which is certainly great news for those hoping to see shares triple in price. Alas, one analyst does not a consensus make.

I don’t know. Strike one: The EV field is way too crowded these days with speculative plays and SPAC babies. Some have air on their tires; others are just hot air.

At this point, betting on GOEV stock and hitting on 15 at the local blackjack table aren’t that far apart. You could win big or lose everything. Or you could watch a company on the share price slide like Nio Inc. (NYSE:NIO) dazzle with its exploding sales figures.

Canoo doesn’t tickle me pink nearly as much as I’d hoped. Until it pulls out of the park, park your money elsewhere.

On the date of publication, Lou Carlozo held long positions in NIO and AAPL.

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