Is Canoo Stock Worth A Look As Reddit Interest Surges?

Electric vehicle start-up Canoo (NASDAQ: GOEV) has seen its stock rally by almost 35% over the last month. The recent gains are driven partly by increasing interest from Reddit traders who have been bidding up prices of small and mid-cap stocks with high levels of short interest. For example, Canoo was up by almost 16% in Tuesday’s trading alone, although it fell a bit on Wednesday. Although Canoo has attracted attention due to its single-digit stock price (as of last week) and short interest levels approaching 30%, it is a bit different from other so-called “meme” stocks. Unlike other Reddit forum favorites such as BlackBerry, AMC, and GameStop – which are “old-economy” companies, that many would argue are well past their prime, Canoo is a futuristic bet. So is the stock worth a look for longer-term investors?

While Canoo stock remains down by about 45% from its January highs, we think the company still remains a relatively speculative bet. Canoo generates no meaningful revenue yet and is only likely to start its vehicle production in 2022, with plans to ramp up sales to 15,000 units in 2023. Even this might be optimistic, given that young EV players have a track record of missing production expectations. We also have some concerns regarding Canoo’s strategic direction, as it appears to have walked back its plans to offer its vehicles via a subscription service, license its technology to third parties, and leveraging an asset-light manufacturing strategy, partnering with the likes of Hyundai. (see update below) However, Canoo says that it has some advantages over rivals, with its scalable electric vehicle platform that apparently gives it more flexibility with packaging components and designing a vehicle’s cabin, but investors may be better off looking for more proof points on the company’s technology and progress before investing in the stock.

Want to play growth in the EV market without betting on individual OEMs? Check out our indicative theme of Electric Vehicle Component Supplier Stocks for more details.

 [5/19/2021] Is Canoo Stock A Buy?

EV startup Canoo (NASDAQ: GOEV) has seen its stock decline by about 10% over the last month and remains down by roughly 40% year-to-date. Canoo stock trades at about $7.50 per share, with its market cap standing at under $2 billion currently. However, we still think the stock looks somewhat speculative for a couple of reasons.

While Canoo has no revenue-generating products, investors were drawn to the stock last year due to the company’s planned strategy of offering its vehicles via a subscription service, using an asset-light manufacturing strategy, partnering with the likes of Hyundai, and licensing its technology to third parties (typically a high margin endeavor). However, as of last month, Canoo had effectively pivoted away from all these plans. Moreover, Canoo has seen a lot of departures at the top management level, with its CEO, Chief Financial Officer, and Head of Corporate Strategy leaving the company over the last few weeks. This isn’t an encouraging sign for a young company in the pre-production phase. Now, although Canoo apparently has a scalable electric vehicle platform, which gives it more flexibility with packaging components and designing a vehicle’s cabin, it still remains to be seen how this will add value to its vehicles. The EV market is getting more competitive and it remains to be seen whether Canoo’s products can really stand out in the market.

Want to play growth in the EV market without betting on individual OEMs? Check out our indicative theme of Electric Vehicle Component Supplier Stocks for more details. 

[4/7/2021] Should You Buy Canoo Stock After Its Big Strategic Pivot?

EV upstart Canoo (NASDAQ:GOEV) stock has corrected by close to 40% from its March highs. While the broader EV sector has seen some weakness in recent weeks, driven partly by higher interest rates, which have hurt growth stocks, and a global shortage of automotive semiconductors, Canoo has been impacted by some major strategic pivots that it outlined during its recent earnings call. Firstly, the company indicated that it would “de-emphasize” its contract engineering services business which planned to provide EV know-how and technology to other OEMs that wanted to enter the electric vehicle market. Secondly, the company’s deal to have Korean auto giants Hyundai and Kia build EVs using its platform appears to be off. This deal was seen as a major win for Canoo when it was announced last year. The company also now appears to be focusing more on commercial vehicles, apparently moving away from plans to sell an electric van to consumers via a subscription model. Finally, Canoo intends to eventually build its own factories, a departure from its prior plan of using an asset-light model that relied on third-party manufacturers.

Want to play growth in the EV market without betting on individual OEMs? Check out our indicative theme of Electric Vehicle Component Supplier Stocks for more details.

Canoo stock now trades at just about $9 per share – below the $10 which the company closed its SPAC merger last December – and the company is valued at about $2.2 billion, well below the $4 plus billion levels it saw just a few months ago. Does this make for a good entry point? We don’t think so. Scaling a potentially high-margin technology licensing business, providing subscriptions, and working with an asset-light model was key to our Canoo investment thesis (see below) and it appears that the company isn’t going to follow through on this. While Canoo apparently has a flexible EV platform, it’s not clear that the company can differentiate itself in the increasingly crowded commercial EV market.

[2/24/2021] Canoo Vs. Workhouse: Which Stock Should You Pick?

Following Tesla’s big rally last year, investors are warming up to smaller electric vehicle (EV) stocks that recently went public via the SPAC route. Workhorse Group (NASDAQ: WKHS) – which is focusing on delivery vehicles, and Canoo (NASDAQ:GOEV), which is looking to cater to the commercial and consumer market, have received a lot of attention, with their stocks up by almost 45% and 20%, respectively, year-to-date. While both companies trade at market caps of around $3.5 to $4 billion and have yet to start commercial deliveries, making them potentially risky bets, we think that Canoo is likely to offer better long-term upside for investors. Here’s a bit more about the two companies.

Want to play growth in the EV market without betting on individual OEMs? Check out our indicative theme of Electric Vehicle Component Supplier Stocks for more details.

Canoo is looking to develop multiple consumer and commercial vehicles, based on its modular “skateboard” platform that integrates batteries into the EV’s chassis. This allows the company to build highly customized vehicles that can serve multiple applications. The company is looking to launch its first lifestyle vehicle in late 2022, following it up with a delivery vehicle in 2023 and a sports vehicle in 2025. Canoo is looking to make its first vehicle available via an all-inclusive subscription fee. The company is also likely to consider licensing its platform to other OEMs. In fact, there were reports that Apple and Canoo were in discussions relating to the rumored Apple car late last year. Canoo projects revenue of close to $330 million in 2022 and is targeting a revenue CAGR of 88% through 2026.

Workhorse builds electrically powered delivery and utility vehicles, targeted at last-mile delivery – a segment that should be an ideal application for EVs, given the low maintenance costs and lower range related issues. Workhorse’s business appears to be more focused although its product doesn’t appear to be as innovative as Canoo. However, the company has been highlighting orders for its EVs from several customers, the largest of which is a 6,000 plus vehicle order from Pride Group, a company that specializes in commercial vehicle rentals and leasing. Workhorse is one of three finalists for a $6 billion-plus fleet upgrade contract to replace the U.S. Postal Service’s aging fleet of delivery trucks and anticipation surrounding a deal has been a big factor driving the stock this year.

Overall, we think that deciding between the two stocks comes down to choosing between Workhorse’s potential order backlog and Canoo’s interesting tech. Workhorse hasn’t manufactured or delivered trucks at scale yet and it’s not clear if all of its orders will translate into actual revenue. The deal with the Pride Group, for instance, is apparently tied to demand for delivery vehicles from Pride Group’s end customers and the final number of vehicles delivered could be smaller. It’s also probably far-fetched to expect a multi-billion contract from the USPS to be awarded to a company without much of a track record. On the other side, while Canoo also has a lot to prove, the company’s flexible technology platform, plans of offering subscription services, and licensing its platform to other EV makers could give it sizable upside in the long-term, if it executes well.

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