It won’t be difficult for readers to find pundits pushing bullish sentiment for Canoo (NASDAQ:GOEV) stock right now. After all, every time a formerly popular stock falters due to sector-wide concerns, the calls for buying the dip increase.
In the case of Canoo, getting onboard with that bull thesis would mean dismissing a number of red flags. Ultimately though, those red flags paint a picture of a company that you don’t want to invest in.
Let’s look through those issues which, in my opinion, form the basis for a lot of bearish sentiment moving forward.
GOEV Stock: Shift in Sales Strategy
One of the bigger points of attraction for Canoo was its former subscription-based sales strategy. Canoo intended to capitalize on the popularity of subscription-based business models and bring them to the EV market.
The idea was that Canoo would develop a subscription in which users could subscribe for a monthly fee with no set end date. Ostensibly, users would have been allowed to sign up, use the car for as many months as they wanted, and then unsubscribe by the month’s end and return the car.
The subscription model fee boasted an all-inclusive, done-for-you package including registration, maintenance, insurance, and charging all from an app. An ambitious task, one that would be difficult to implement.
In any case, the model gained Canoo some attention, and was stated to initially be tested in L.A.
However, in late March Canoo announced it was shifting toward a commercial sales strategy focused on fleet operators. Canoo also mentioned that it was going to focus less on selling through its subscription model at the same time.
Deals Soured
Canoo’s EV platform underpins everything that the company does. The company has plans for several iterations of vehicles based on the platform. That platform has garnered a lot of attention in regard to strategic partnerships. However, they seem to result in little to no tangible results.
The first such example was the Apple Car rumors. Apple’s Project Titan, which focuses on EV and driverless car tech, was revealed to have considered investing in or acquiring Canoo in 2020. A deal never materialized, but when the news was revealed in early 2021, GOEV stock got a bit of shine and prices rose.
Canoo was also dealing with Hyundai since February of 2020 and it looked like Hyundai/Kia would utilize Canoo’s platform to build some of its EV vehicles. That deal also appears to have soured, as Canoo’s most recent investor presentation mentions neither Hyundai nor Kia.
Executive Drop-off
A company in flux needs to appear able to handle distress. Most would agree with that sentiment. If it is indeed true, Canoo has more trouble.
Canoo’s CEO was absent from the company’s first earnings call post-IPO and the company’s CFO resigned earlier in the same day. That will clearly lead the market to draw its own conclusions about the stability of the company.
All of those issues mentioned above don’t bode well for the company. A shift in sales strategy, a string of potential deals which soured, and executive turnover do nothing but decrease investors’ confidence in GOEV stock and Canoo.
But if those reasons aren’t persuasive enough to stop you from considering putting money into Canoo, the company’s financial statements should.
GOEV Stock: Financial Position
Canoo is a company which lost $173.66 million from operations in 2019. That figure swelled to $199.72 million in 2020. Investors can pore over cash flow and operations statements and find some reason for positivity, undoubtedly. However, the company is essentially back at square one, and the promises it made in the past are simply not materializing.
As a result, investors should ignore bullish sentiment and sell or avoid GOEV stock.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”
