Mullen Automotive (NASDAQ:MULN) stock keeps making headlines, but this is failing to result in recharging investor excitement. Instead, investors keep bailing on shares in this early-stage electric vehicle (or EV) company.

Sliding another 37.2% over the past month, Mullen now trades for less than a tenth of what it traded for at the start of 2022. Now in the stock market junkyard, you may be thinking that after being overhyped last winter, shares have become oversold.

Unfortunately, that’s far from the case. The market hasn’t been irrational in bidding down shares to sub-$1 prices. Even as recent developments signal that it’s making progress moving toward the production/revenue stage, a lot suggests this will fail to translate into substantial upside for investors.

Put simply, investors are making the right call. Instead of going contrarian, you should follow their lead. Here’s why.

MULN Stock Keeps Tanking

As seen from the spate of press releases out of Mullen Automotive in the past month, the company continues to inform the public of the progress it’s making. These have included more details about its vehicles, as well as the announcement of its acquisition of a majority stake in EV truck maker Bollinger Motors.

The fact that speculative growth stocks are currently out-of-favor among investors is playing a role in sending MULN stock lower, new developments notwithstanding. Yet this isn’t the main reason why shares are sinking.

Unlike earlier this year, when hope and hype sent it skyrocketing, investors have wised up. They’re now looking at the company with a more critical eye. Diving into the details, they are no longer ignoring its negatives and focusing solely on its positives.

Taking the good and the bad into account, the market has come to a conclusion. When it comes to this stock, its many risks far exceed the possible rewards. This current sentiment isn’t likely to change anytime soon, as Mullen’s key issues remain unresolved.

High Downside, Questionable Upside

MULN stock offers potential investors the unfavorable proposition of high downside risk, with questionable upside potential. It’s a small player compared to EV heavyweights like Tesla (NASDAQ:TSLA), as well as incumbent automakers now entering the EV space.

Big success for Mullen hinges on being able to beat established rivals in areas like greater range for its EVs. It’s at work developing battery technology that could make this possible. However, if these efforts prove fruitless, the company could ultimately fail to ever gain any sort of edge in the increasingly competitive EV market.

Along with the uncertainty over its battery technology, its poor capitalization is another risk. The company not only lacks the deep pockets of mature automakers but other EV startups as well. It doesn’t have billions in dry powder to put to work like an EV upstart such as Lucid Group (NASDAQ:LCID) does.

This lack of capitalization is key with regard to its questionable upside. To move beyond the startup stage, Mullen will likely need to raise more cash. Whether through the sale of new common stock, or the sale of convertible debt, the resultant dilution will limit the stock’s potential to appreciate in value.

The Bottom Line

MULN stock earns a D rating in my Portfolio Grader. Investors are no longer buying any stock associated with the vehicle electrification trend. The market has become more selective. That’s why this subpar play has tanked in price, despite the flurry of seeming-positive news out of the company as of late.

Sure, the company could prove the skeptics wrong. It may just well end up coming out with superior EV battery technology. Even then, this may not be enough to get it moving again in the right direction. Further shareholder dilution appears very likely, given that mass production of vehicles is capital-intensive.

If you’re bullish on the continued rise of EVs, there are better opportunities out there. Don’t waste your time on MULN stock. Stick with the stronger EV stocks out there instead.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.