Canoo Stock Is Up 130% in July — and Has Tons of Runway Left

  • The major headwinds that caused the EV Revolution to step back in 2022 are now fading, which means electric car stocks are ready to take two giant steps forward again.
  • Walmart, the world’s largest retailer is choosing to buy 4,500 Canoo delivery vans, with the option to purchase up to 10,000. It’s also being given the right to acquire about 20% of Canoo, and not to mention, it made Canoo agree not to sell any vans to Amazon.
  • This Walmart deal doesn’t just validate Canoo’s MPP tech — it also illuminates a pathway forward for the company to secure enough non-dilutive financing to power forward.
Person holding mobile phone with website of US electric vehicle manufacturer Canoo Inc. on screen in front of logo. Focus on center of phone display. Unmodified photo.

Source: T. Schneider / Shutterstock.com

July has been a good month for electric vehicle (EV) stocks. And for a tiny EV maker by the name of Canoo (GOEV), it’s been an especially good month.

Month-to-date, the S&P Kensho Electric Vehicle Index is up about 8%. Meanwhile, Canoo stock is up nearly 130% in July. Those are some big gains. But believe it or not, the party in EV stocks may just be getting started.

The big-picture thesis here is simple.

Electric cars and vehicles are the future of auto transportation. It’s a future that’s travelled at warp speed these past few years. The number of EVs sold per year has grown by 3,000% since 2014. This year, EVs account for about 15% of total auto sales.

However, technological progress does not move in a linear fashion. For every two steps forward, it takes a step back.

Electric vehicles took two giant steps forward from 2018 to 2021, when EV penetration rose ~5X. That was thanks to the launch of more affordable electric cars with longer driving ranges, namely Tesla’s (TSLA) Model 3. Then, electric vehicles took a step back in 2022. And that was thanks to soaring battery metal prices and production hiccups in China (which controls about 60% of the world’s EV battery manufacturing capacity).

But on average, industrial metal prices have declined by about 30% over the past three months. At the same time, China is easing its COVID-19 lockdown policies. And as a result, manufacturing capacity in that country is rapidly expanding. China’s manufacturing PMI has expanded meaningfully in two consecutive months for the first time since late 2020, when, uncoincidentally, EV stocks were soaring.

In other words, the major headwinds that caused the EV Revolution to step back in 2022 are now fading. That means electric car stocks are ready to take two giant steps forward again.

The investment implication? It’s time to buy EV stocks. And it’s especially time to buy Canoo stock.

The Canoo Stock Bull Thesis

A Canoo MPDV being loaded with small shipping containers

Source: Canoo media

One of our favorite stocks at the current moment is Canoo. It’s a U.S.-based EV manufacturer that’s building the most unique electric car in the market today.

Throughout 2021 and most of 2022, Canoo stock was hammered by executive departures, production delays, business model changes, and cash-burn concerns. Though, over the past month, GOEV has soared, rising as much as 150% after a string of positive developments.

First, the company announced a partnership with Walmart (WMT) for the order of thousands of electric delivery vans. Second, Canoo said that the U.S. Army was testing its vehicles for potential use in military operations.

Some are calling these positive developments “head fakes” for an otherwise troubled EV maker. We view them as reasons that Canoo stock could be a huge long-term winner.

To understand why, let’s revisit the multi-year bull thesis on GOEV stock.

In short, Canoo has assembled a world-class engineering team to build a breakthrough multi-purpose-platform (MPP) electric vehicle powertrain technology. And through some cool tricks like drive-by-wire, it eliminates all wasted space from a vehicle.

Therefore, this platform enables the construction of uniquely designed cars, vans, and trucks that maximize interior space. And it’s all on the same size vehicle platform as a competitor’s.

For example, the company’s Lifestyle vehicles can comfortably seat seven on a platform size that’s normally reserved for five-seater vehicles. The platform is actually shorter than a Tesla Model 3. Yet, the car has about double the passenger volume (188 cubic feet, versus 97 cubic feet for the Model 3).

Meanwhile, its pick-up truck and delivery van — both also built atop the same MPP — feature ~30% more cargo space than trucks and vans of the same size.

We view these “space” advantages as meaningful value props to potential customers.

For big families, a Canoo Lifestyle vehicle makes a lot of sense, especially at sub-$50,000 price points.

For logistics companies, a Canoo delivery van seems like the best option. It will reduce total transit time taken by maximizing the volume of cargo carried on each trip.

And for contractors, a Canoo pick-up truck looks very useful, since it maximizes workable cargo space.

To that end, we’ve long seen Canoo as emerging as one of the world’s leading manufacturers of electric vehicles.

The market hasn’t seen things our way. Canoo stock has been crushed over the past year. But it’s suddenly soaring again. Indeed, recent developments underscore that the Canoo stock bulls may have been right about the company all along.

Recent Developments Validate the Tech

As stated earlier, Canoo stock has been jumping recently for two reasons:

  • A big Walmart partnership and pre-order
  • News that the U.S. Army is testing Canoo vans.

These strongly validate the bull thesis on Canoo.

Walmart is the world’s largest retailer. By extension, it’s one of the largest delivery companies in the world, too. It’s choosing to buy 4,500 Canoo delivery vans, with the option to purchase up to 10,000. It’s also being given the right to acquire about 20% of Canoo. And not to mention, it made Canoo agree not to sell any vans to Amazon.

Connect those dots. Why would Walmart order up to 10,000 vans, strike an agreement to control about a fifth of the company, and make Canoo agree to not sell any vehicles to its largest competitor? The 10,000-unit order is one thing. And the equity grant and non-compete agreement elevate this deal to a whole new level.

Walmart must really like Canoo, and it must really see the value prop of these vans.

The U.S. Army news is much less meaningful but still important. The U.S. Army is another large entity that’s looking for space-maximizing vehicles for cargo transport. Uncoincidentally, it’s very interested in Canoo vehicles.

To that end, we believe the long-term bull thesis for Canoo stock has been bolstered over the past two weeks.

Canoo could always win in the EV race if it could prove its cars offer space-boosting advantages that space-conscious customers find appealing. Walmart and the U.S. Army are saying they like those advantages. And so is NASA (who also has a deal with Canoo).

Therefore, if Canoo can continue to execute, this stock could absolutely soar over the next few years.

goev

Huge Upside for GOEV Stock

Now, the significant risk with Canoo stock is liquidity.

In short, the company is burning cash like crazy to scale manufacturing of its vehicles. And it doesn’t have that much left on the balance sheet. At current burn rates, Canoo could run out of cash any moment (before it produces enough to become cash-flow positive).

It will have to tap the capital markets for more capital just to live to see another day.

But who would give a struggling EV maker with a massive burn rate and little demand validation a ton of capital to scale the business? The pool of potential financiers was limited…

Until Walmart came into the picture.

Now the question is: Who is going to give an EV maker with a massive pre-order from the world’s largest retailer enough capital to fulfill that pre-order? The pool of potential financiers for that EV maker is much, much bigger.

In other words, the Walmart deal doesn’t just validate Canoo’s MPP tech. It also illuminates a pathway forward for the company to secure enough non-dilutive financing to power forward.

A month ago, Canoo was an EV startup on the verge of bankruptcy. Now it has a clear path to hitting billions of dollars in revenue within the next few years.

The stock is still adjusting to this shift. Indeed, we wouldn’t be surprised to see Canoo stock take out the $10 level over the next six months.

But it won’t be the only EV stock that wins big in the near future…

The Final Word

We love what’s going on with GOEV stock today. And while we still think shares are risky, we believe the long-term upside potential from current levels – and odds of success – are enough to warrant taking a small, speculative position today.

But GOEV stock isn’t our favorite EV stock right now.

Instead, that title belongs to a tiny $3 technology stock. It may be the single most compelling 12-month investment opportunity in the market today.

You see, the world’s largest company — Apple (AAPL) — is about to the enter the EV game. It’s been working on a super-secret “Apple Car” project since 2015. Late last year, the company reportedly increased investments into the project, accelerating its development timeline.

That means Apple will likely launch its own EV within the next two years.

If the success of its iPhone, iPad, Mac, Apple Watch, etc. are anything to go on, it’s very possible the Apple Car will a monster hit. It’s even possible that this car unseats Tesla as the best-selling EV in the market.

If so, the Apple Car could be the biggest product Apple’s ever released… by far.

And per my analysis, the $3 stock I’m talking about is positioned to secure a partnership with Apple to supply a critical piece of technology to make the Apple Car work.

If that sounds like a big deal, it’s because it is. My modeling suggests this tiny stock could soar 40X over the next few years. It may be the most exciting investment opportunity in the market today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/hypergrowthinvesting/2022/07/canoo-stock-is-up-130-in-july-and-has-tons-of-runway-left/.

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