After struggling to sustain upside momentum through bits and pieces of positive developments, electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) provided its latest iteration. Earlier this morning, Mullen announced it would partner with a small-business government contractor to deliver commercial fleet vehicles. In the early afternoon, MULN stock popped up over 4%.
According to the accompanying press release, Mullen will team up with Rapid Response Defense Systems (RRDS) to “…fast-track U.S. Federal Government opportunities for potential large-scale vehicle fleet orders.” As one of the leaders among federal contractors listed as small businesses, RRDS has executed over 2,500 federal government delivery orders since 2014.
Perhaps most notably for MULN stock, the government contractor “…currently holds a prime seat on 12 Indefinite Delivery/Indefinite Quantity (IDIQ) federal contracts with combined funding ceilings of $4 billion.”
According to the U.S. General Services Administration, IDIQ contracts “…provide for an indefinite quantity of services for a fixed time. They are used when GSA can’t determine, above a specified minimum, the precise quantities of supplies or services that the government will require during the contract period. IDIQs help streamline the contract process and speed service delivery.”
“Mullen Automotive is proud to team up with RRDS for U.S. government fleet opportunities for our Class 1 EV cargo vans,” said Mullen’s CEO and Chairman David Michery. “We look forward to working closely with RRDS in meeting the demand for EVs across the U.S. government’s fleet of vehicles.”
For MULN Stock, Opportunity May Meet a Sober Reality
On the surface level, this latest development bodes well for MULN stock. Often seen as a highly risky and speculative wager among market analysts, Mullen continues to attract interest on the showroom floor, so to speak.
Nevertheless, sentiment for MULN stock was relatively muted compared to some of the more significant single-day moves it made previously. Much of the reason centers on the potential upside of the partnership, not the actual results. In particular, Mullen still needs to launch its Class 1 EV cargo van.
As well, stakeholders of MULN stock need to prepare themselves for a remorseless government contract ecosystem. During its heyday, commercial EV specialist Workhorse (NASDAQ:WKHS) screamed higher ahead of the U.S. Postal Service’s contract awarding for its Next Generation Delivery Vehicles (NGDVs). As the field of potential candidates whittled down, Workhorse represented the only fully electric solution.
Given the political and social winds blowing toward electrification, Workhorse appeared a no-brainer. However, to the surprise of many, the USPS awarded the deal to defense contractor Oshkosh (NYSE:OSK). To be sure, Workhorse filed a protest. As well, criticisms circulated about the opaque nature of the bidding process.
However, the USPS may have had legitimate reasons to favor Oshkosh over other candidates. In particular, EVs still represent nascent technology, and their impact on the current power grid could pose serious challenges.
In fairness, infrastructure development and new technologies — such as quantum charging capabilities — could close the convenience gap to combustion-powered vehicles. But such initiatives could impose onerous costs and might not even be scientifically viable.
Why It Matters
MULN stock continues to attract retail investors, although only the astute appear to be consistent beneficiaries. According to TipRanks, among what it considers top investors, this investor cohort gained an average of 2.5% on their Mullen holdings in the last seven days.
In contrast, the category of all investors lost, on average, half a percent during the same period. Therefore, MULN stock remains a gamble despite occasionally delivering fundamentally encouraging news.
On the date of publication, Josh Enomoto 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.
