Given the high volatility, Mullen Automotive (NASDAQ:MULN) has been a haven for traders. Of course, one needs to be on the right side of trade to benefit from this high-beta pick. So, where is MULN stock headed in the near term?
With a short interest as a percentage of free-float at 15.92%, it seems that the bearish sentiment will prevail. However, there can also be a case for a short squeeze. Given the fundamental developments, I would assign a higher probability of downside than another big rally from current levels.
In February, MULN stock traded at lows of 52 cents. However, the reversal rally was sharp, with the stock trading surging to $3.30 in a few weeks. The rally was triggered by two factors.
First, Mullen announced that it’s on track to meet its 2022 operational goals. The company also reiterated it’s set to deliver its first cargo van fleet electric vehicle (EV) in the second quarter of 2022. Mullen also announced last month that an order for cargo vans is due from a major Fortune 500 company.
Furthermore, Mullen also claimed positive results from solid-state battery testing. The company is talking about a range of 600-plus miles on a full charge. The battery can reportedly deliver more than 300 miles of range with just 18 minutes of DC fast charging.
The positive sentiment created by the news flow was interrupted by a negative report by Hindenburg Research. The report concluded that Mullen is “yet another aspiring electric vehicle manufacturer that has burst onto the market with grand promises – and little to back them up.”
It’s worth noting that Hindenburg Research has been right on the likes of Nikola (NASDAQ:NKLA) and Lordstown Motors (NASDAQ:RIDE). I would therefore be cautious after a sharp rally from below one dollar.
Additionally, the price action and the market capitalization have a language of their own. Amidst all the tall claims, Mullen trades at a market cap of $636 million. This shows the skepticism of market participants about the company.
Another point to note is the electric vehicle industry has tailwinds that will last beyond a decade. However, the industry is facing medium-term challenges in the form of chip shortages and raw material inflationary pressure.
In these times, it makes sense to go with established players with strong fundamentals rather than a speculative bet. I would not mind entry at higher prices after some credibility is established about Mullen’s plans and growth. At best, long positions in MULN stock can be considered with capital that investors can afford to lose.
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On the date of publication, Faisal Humayun did not hold (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.
