Canoo (NASDAQ:GOEV) remains a concept electric vehicle company, and to be fair there’s nothing wrong with that reality. Still, with GOEV stock manufacturing another kind of very real bearish feature, investors dreaming of the next big, big thing would be wise to use caution. Let me explain.
No revenues and big ideas. The combination was a blueprint for printing money for many blank-check companies last year and for a short while in 2021. But the hyped trend proved highly combustible for the high-flying EV-related stocks brought public through the SPAC (special purpose acquisition company) process.
Nikola (NASDAQ:NKLA). QuantumScape (NYSE:QS). Lordstown Motors (NASDAQ:RIDE). Innoviz Technologies (NASDAQ:INVZ). There has been some carnage within the EV SPAC universe. And GOEV stock can be included in that ignominious list.
Shares of Canoo are off about 30% year-to-date. But that’s far from the worst of it for many GOEV investors. The stock has also shed a much steeper 60% from its late December all-time high of $24.90.
GOEV’s peak valuation coincided with GOEV’s merger with Hennessy Capital, which was perversely met with a “sell-the-news” response rather than a champagne toast by Wall Street. Following the initial sell-off, a broader retreat out of higher and no multiple growth stories also proved a key driver in GOEV’s continued spiral lower. And rightfully so.
From A to Z — or rather Airbnb (NASDAQ:ABNB) to Zillow (NASDAQ:Z) — even much larger growth stocks across industries of all kinds weren’t spared from Wall Street’s pivot to locate more meaningful value. And bottom line, GOEV remains a riskier proposition within that cadre of stocks.
The fact is, today’s GOEV stock and its prospects for survival are all about the future. The company’s pitch of bringing EVs to market with inventive modular skateboard platforms and sporting roomy, loft-like interior spaces sounds cool. As does the outfit’s strategy of offering an innovative subscription model for consumers to get behind the wheel of a Canoo vehicle. But you’ll have to wait.
Right now, getting behind the wheel of a Canoo vehicle requires reserving your spot on a waiting list. And for GOEV stock investors today, waiting for signs of a bottom to enter the market before making a purchase makes sense.
GOEV Stock Weekly Price Chart
Source: Charts by TradingView
It’s human nature to want to own the next big, big thing. Who wouldn’t want the next Apple (NASDAQ:AAPL) in their portfolio, right? And for some meme-driven investors today’s GOEV is all about rumors of an AAPL acquisition.
Buzz of Canoo’s EV platform being the basis for an Apple Car are nothing new. Now the Reddit crowd has GOEV’s former CEO coming on board the tech giant’s Apple Car division. And it helped drive shares higher by as much as 40% over the past couple weeks.
But InvestorPlace’s Luke Lango warns against trying to connect those dots into a merger and basis for buying GOEV stock. That’s not to say Luke is against purchasing Canoo shares. In fact, he’s upbeat on the company’s long-term growth proposition given its game-changing designs.
Unlike Luke, I’d stress bullish investors should still defer to GOEV’s bearish price chart and hedge those risks accordingly.
Technically, GOEV stock has just confirmed a bearish pivot high in its existing downtrend channel. Shares fell beneath the low of an inside hangman candlestick and it could get ugly should a new bearish pattern low be in the offing.
To be fair, conditions in Canoo could always change for the better. And sometimes the shift can happen abruptly too. But today, it is what it is. And right now, GOEV bulls are clearly on the wrong side of an unfinished bearish cycle.
But if, like Luke, you want to dive in, I’d strongly favor a collar position.
Today I’d recommend buying GOEV stock as part of a 2023 Jan $12.50/$22.50 collar combination. Given what we’re seeing off and on the price chart, including GOEV’s stiff short interest of nearly 28%, this limited risk and highly flexible position offers superior leverage potential, as well as safety features to protect against becoming a crash-test dummy.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.