As Canoo (NASDAQ:GOEV) continues to paddle upstream and there is little reason to invest in GOEV stock at this point. When EV enthusiasm was at its peak, Canoo emerged as a very interesting company.
It had aspirations to set itself apart within the fledgling crowd of EV upstarts. The company made headlines for offering its vehicles on a subscription basis. That was back when subscription based models were really in the public eye. The company later changed its tune with a shift toward commercial fleet operator sales.
That wouldn’t be the last time Canoo disappointed.
Rumor Mill Failed Canoo
GOEV stock also benefited from rumors that its platform would serve as the basis for the Apple (NASDAQ:AAPL) car. That too, failed to materialize into anything tangible. Canoo had also been dealing with Hyundai (KRX:005380) as a potential platform provider to the South Korean conglomerate. Same story there, lots of hope and few results.
The end result is that GOEV stock failed to live up to its earlier billing. It is now looking more like a has been, rather than a will be. Perhaps nothing currently exemplifies that assertion better than short interest.
Squeeze Play
Short interest in GOEV stock is a very high 32.48% currently. That puts Canoo among the top 20 most heavily shorted stocks presently according to MarketWatch.
The higher the percentage of short interest in a stock, the more pessimistic the market is about that stock. So, in this case, that high short interest serves to exert downward price pressure on Canoo shares. It also signals the market that Canoo is overvalued as an equity.
Yet, it is also a bit of a catch-22 in that high short interest can trigger bullishness. The bullishness I’m referring to is that around a potential short squeeze. If enough short sellers cover their positions that should trigger upward price pressure on GOEV stock.
So, there are opposing points of view here regarding Canoo’s price trajectory due to that short interest. Perhaps manufacturing news can provide some clarity on which direction Canoo shares might move.
Manufacturing News
Earlier in the summer Canoo released news regarding the manufacturing of its vehicles. On June 17 Canoo unveiled plans for what it refers to as parallel pathing for its vehicles.
Canoo will rely on two paths for the manufacturing of its vehicles. First, the company revealed that it has selected Oklahoma for the location of its owned manufacturing. Canoo will develop a 400 acre campus in Tulsa’s MidAmerica Industrial Park.
Canoo referred to the site as a ‘mega microfactory’ which seems like a bit of a contradiction to me. That aside, the factory is slated to open in 2023 and bring 2,000 jobs to the area.
At the same time that Canoo released that news, it also announced that it had selected VDL Nedcar to bring its first vehicle to market in Q4 2022.
Similarities With Fisker
VDL Nedcar will manufacture Canoo’s Lifestyle Vehicle for the US and EU markets. At the same time, Canoo will be constructing its Oklahoma factory. Thus, Canoo has referred to the strategy as parallel pathing.
VDL Nedcar is a Netherlands based company of 4,000 employees which produced more than 125,000 vehicles in 2020. The company has manufactured vehicles for Volvo, Mitsubishi, and the BMW Group.
Contract manufacturing is fast proving a go to strategy for EV upstarts. Fisker (NYSE:FSR) has contracted Magna International (NYSE:MGA) to manufacture its Ocean SUV.
And Fisker itself recently received a bump in price when Morgan Stanley (NYSE:MS) analyst Adan Jones resumed coverage of the stock, giving it a $40 price target. There is little to indicate that Fisker’s choice of Magna for contract manufacturing is behind the vote of confidence. However, many have noted that the choice makes logical sense given Magna’s strong automobile OEM pedigree.
Verdict
I commend Canoo on its contract manufacturing decision. But the comparisons between Fisker and Canoo don’t go much further than that. Fisker looks to be much farther ahead. I still see Canoo as a laggard, and an EV stock to avoid.
On the date of publication, Alex Sirois 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.
