To say that electric vehicle manufacturer Canoo (NASDAQ:GOEV) is suffering from a disastrous honeymoon as a public company would be a gross understatement. Making its initial public offering via a merger with a special purpose acquisition company or SPAC, many speculators had high hopes for GOEV stock.
And frankly, why not? On paper, the underlying company committed to developing a lifestyle transportation platform, one that caters to younger audiences.
At one point, GOEV stock popped up to a closing price of $22. But since then, it’s been nothing but a series of red ink days. Back in January of this year, Paul Ausick of 24/7 Wall St. remarked that “Canoo’s early investors are cashing out now that the company’s market cap has reached nearly $4.5 billion, about double its pre-IPO valuation. Whether new investors in Canoo will reap similar rewards down the road remains to be seen.”
So far, the answer is a harsh “no.” It’s hard to imagine anybody wanting to risk their money with GOEV stock, considering its inability to gain traction. Even with the recent rebounding for the Aug. 23 session, investors still find the shares down a shocking 40%.
And no, I don’t think it’s a wise move to gamble on GOEV stock based on the event that sparked the move. As InvestorPlace contributor Chris MacDonald reported, “The National Highway Traffic Safety Administration (NHTSA) is set to consider higher penalties for automakers that fail to meet fuel efficiency requirements. While a negative catalyst for traditional auto makers, this announcement turns out to be very bullish for EV-focused companies.”
“Indeed, any sort of regulatory environment that encourages more ZEV (zero emission vehicle) credits to be bought and sold could benefit Canoo, should this company start producing vehicles en masse,” MacDonald added.
While seemingly a no-brainer, I wouldn’t get too excited about Canoo just yet.
GOEV Stock Isn’t Relevant to the Customer
Back when Porsche — the famous sports car brand under Volkswagen (OTCMKTS:VWAGY) — introduced the Cayenne SUV in 2002, the move offended purists. After all, Porsche was world renown for its iconic 911 — speed, aerodynamics and best driven at a triple-digit speed.
SUVs, on the other hand, represented everything that automotive enthusiasts hated — mundane, uninspiring and, God forbid, practical.
However, Porsche proved that it made the right decision. Today, no one bats an eyelash when they see a Porsche-branded SUV. It has become normalized. Indeed, the company saw the signs of inevitability because sports cars simply didn’t have the pizzazz they once did.
Similarly, it’s the reason why Ford (NYSE:F) — a stock I own for full disclosure — rebranded its Mustang as an electric SUV. The automaker also ticked off enthusiasts who preferred their Mustangs to be pony cars. But here’s the reality check — no one’s buying these things.
While I appreciate that Canoo is trying something different, the problem I see is that no one’s asking for its bizarrely shaped lifestyle EVs. If they did, I’m pretty sure GOEV stock wouldn’t be down 40% for the year.
Although beauty is in the eye of the beholder, statistics are not. Through various publications and research studies, it’s clear that younger people generally stay indoors more often than prior generations did. And that’s not to pick on millennials and Generation Z. A study from Yale Environment 360 revealed that both adults and children “have lost a close connection with nature.”
This dynamic stems from people in this country spending little time outside in nature. So it’s a bit strange to design a vehicle around an exploratory lifestyle that frankly doesn’t exist to the magnitude that Canoo needs it to.
Not understanding your core market will lead to devastating results, as GOEV stock can attest.
Politics Won’t Save Canoo
Also, I wouldn’t hold my breath regarding regulatory pressure on automakers. At some point, the Washington machinery will start to realize that excessive regulation is damaging for the economy. Since we’re not exactly out of the woods yet from the devastation of the pandemic, it’s too early in my view to start forcing automakers to go electric.
Besides, if you haven’t been paying attention to the news cycle, let’s just say that President Biden is not very popular right now. That opens the door for the Republicans to start making inroads over the next few years, which might result in a rollback of the latest go-green initiatives.
I’m not going to say that GOEV stock won’t benefit at all from the political backdrop. At this point, both sides of the aisle generally agree that environmental challenges represent a serious concern. But from what I’m seeing with Canoo stock, it has much bigger problems than an election or two can solve.
On the date of publication, Josh Enomoto held a LONG position in F. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.