Canoo (GOEV) stock price has continued its strong downfall, moving to its lowest level on record as doubts about its future have remained. It slipped to a low of $0.55 on Friday, bringing the year-to-date losses to 90%. This makes it one of the worst-performing companies in Wall Street, and one that many analysts expect will turn into the next Fisker.
Good products and progress bit problems remain
Canoo is one of the top companies that seeks to become the next big thing in the automobile industry.
It focuses on the utility industry, where its vehicles are designed for use by retailers, small businesses, and delivery giants like UPS, FedEx, and DHL.
Canoo is building a few vehicles. The LDV 190 has a maximum payload of 1,624 pounds and a maximum range of 200 miles, and the LDV 130 has a maximum range of 1,432 pounds and a range of 217 miles.
Canoo is also working on the LV, a SUV starting at $43,500, and a pickup truck that aims to compete with the likes of Ford and Rivian.
The company has made several achievements in the past few years. It has recently received the approval of its Foreign Trade Zone approval in Oklahoma City, a move that it expects to save it millions of dollars in the near term. The approval also came with incentives worth $115 million.
Canoo has also received orders from some of the top companies in the US like Walmart and USPS. Its order backlog stands at over $3 billion, with $750 million being confirmed.
The company also bought manufacturing equipment from Arrival, a collapsed British electric vehicle firm. The benefit of this is that it received these items at a cheaper price since the company was in administration.
Read more: Canoo stock price analysis: GOEV bankruptcy risks are elevated
Mountain of challenges remain
The challenge for Canoo is that its business and the broader electric vehicle industry is going through a rough patch.
Recent data shows that most small and large businesses still prefer buying vehicles with internal combustion engines (ICE).
The EV industry is still in its infancy, with the infrastructure that is needed being significantly off. That explains why many EV companies are struggling, with many dealers finding it difficult to sell their vehicles.
Fisker and Lordstown Motors which had a lot of promise have collapsed. Similarly, companies like Rivian and Lucid Motors have become cash incinerators, burning billions of dollars in the past few years.
Just last week, Ford announced that it would pause manufacturing of its electric lightning product, in a sign that there was no demand.
The biggest issue that Canoo faces is that its balance sheet does not have enough money to push it forward. Earlier this year, the management even issued a going concern warning, hinting that its cash was at risk of running out in the foreseeable future.
Just last week, the company announced that it was furloughing 30 workers in Oklahoma, a big number that represented about half of the workforce. That is a sign that curtains are falling on the company, as I have warned before.
Read more: Another bad EV news sends shockwaves to Lucid, Fisker, Canoo stocks
Canoo’s cash reserves are running out
Data compiled by SeekingAlpha shows that Canoo ended the last quarter with just $9.9 million in cash and short-term investments. While this is a lot of money, it is a tiny amount for a company that is burning millions more per quarter.
Canoo also has a mountain of debt, with $47.2 million in short-term debt and $28.6 million in long-term debt.
In the past, it was possible for Canoo to buy time by raising cash through selling shares. Now, however, its equity is value has dropped to just $47 million. This means that its fundraising would not be enough even if it raised all these funds.
Therefore, with Canoo, we have a company in an industry that is not doing one, one that is burning cash at a fast pace, and one that is burning cash at a rapid rate. I believe that the company will likely file for bankruptcy in the coming months.
Canoo stock price analysis
GOEV chart by TradingView
The daily chart shows that the GOEV share price has been in a strong bearish trend for a long time. It engineered a stock split in March in a bid to maintain its NASDAQ listing, but the stock has moved below $1 once again. This means that it will need to do another reverse split to maintain the listing.
Canoo shares have moved below the key support level at $1.24, its lowest point on March 14. It has also moved below the 50-day and 100-day moving averages, meaning that bears are in control.
Therefore, the path of the least resistance for the stock is downwards, with the next point being at $0.20, which is much lower than the current level. The next potential catalyst will be its earnings on November 14.
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