Canoo Stock Forecast: As the electric vehicle market heats up, new automakers are springing up left and right to compete. Canoo (NASDAQ:GOEV) is a startup electric vehicle manufacturer. In addition to consumer vehicles, Canoo is producing a line of electric delivery vehicles for commercial use. The company was founded in 2017 and plans to begin selling vehicles later this year.
Canoo’s major innovation is in its approach to changing and upgrading parts. Canoo’s vehicles are designed to be modular, allowing them to be changed as new parts become available.
This is especially relevant to the battery packs, which are designed to be easily changed out for new battery technologies that may become available in the future.
Canoo Revenue, Earnings and Growth
In the most recent quarter, Canoo reported a loss of $0.54 per share. This was below analyst expectations of -$0.50 per share. The recent reporting also showed widening losses over the previous year when Canoo reported -$0.07 per share in the same quarter. Revenue data is not available for Canoo, as it has not yet begun selling its vehicles.
Because of the overall lack of data, growth metrics for Canoo are quite hard to forecast. The company itself projects revenues of over $4 billion by 2026, though it has already missed earlier targets.
While it is safe to say that the company will see a significant spike in revenues once it begins delivering vehicles, there’s very little telling how large that spike will be or what earnings will look like at that point.
The one huge bright spot for Canoo when its vehicles do become available is an agreement the company has to provide Walmart with delivery vehicles. This deal could be enormously valuable to Canoo, but it first has to be able to produce vehicles to sell.
As of right now, the deal has great potential for Canoo but doesn’t mean much until the automaker can hold up its end of the bargain.
Target Price and Valuation
Analysts expect Canoo to produce strong returns over the next 12 months, rising from a current price of $4.19 to a median target of $10. This would produce a return of 139.2 percent, though there is no guarantee that Canoo will achieve such lofty numbers this year.
In terms of value, Canoo is at too early a stage for ordinary value metrics to apply. Until it begins selling, metrics such as price-to-sales and P/E have no insights to offer.
One factor that might support a more positive view on the company, however, is the percentage of stock that is held by company insiders. At 21.9 percent, insiders hold a great deal of Canoo’s shares. Insiders have also bought more stock over the last 12 months than they have sold, potentially indicating strong internal belief in the company’s current trajectory.
Canoo: Competition & Cash Burn Concerns
The biggest risk factor facing Canoo is almost certainly its competition. The electric vehicle space has become increasingly crowded in recent years, with many startups attempting to displace legacy automakers for market share.
Tesla has been by far the most successful in this effort, but a slew of smaller companies have emerged as well. Given that Canoo hasn’t yet begun selling its vehicles, a shakeout in the market almost certainly wouldn’t favor the fledgling company.
Another serious risk factor for Canoo is the fact that the company only has $109.25 million in its cash reserve. Given the capital intensity of automotive manufacturing, this reserve seems as though it could be insufficient.
Canoo can likely borrow, as it only carries $27.36 million in debt. This thin cash position, though, raises concerns about how long the company can continue losing money.
Finally, investors should be aware that Canoo is in an extremely early stage of its business. The company is still polishing its vehicles for production and sales, and it has yet to be tested by the consumer market. As such, there is always the substantial risk that sales could fall short of expectations when Canoo’s vehicles are available.
Is Canoo a Buy?
At the moment, Canoo does not appear to be a compelling buy. Until sales and margin data become available, investors are left guessing as to how well the company will perform. Between this fact, large amounts of competition and a lean cash position, the business doesn’t seem particularly attractive in its current state.
Canoo also lacks any kind of viable moat around its business. While the concept of reusable parts and upgradeable vehicle platforms is interesting and may appeal to consumers, it’s still an unproven model. Until Canoo can demonstrate that consumers actively favor its approach, there’s no strong evidence that the company has a competitive advantage.
The final point to consider when evaluating Canoo stock is the plethora of other options that exist for investing in the EV space. Competing companies such as Nio, Li Auto and Rivian are all ahead of Canoo on sales and deliveries. This makes it difficult to select Canoo over its competitors as an investment.
Overall, Canoo is an interesting and innovative company that could become quite successful. As an investment, however, there are simply too many unknowns. Canoo stock is likely too speculative for most investors at the moment, though it’s a company that could be worth watching over the next few years. Once vehicle deliveries begin, investors will likely have much more hard data to use in determining whether or not to buy Canoo.
Another possible upside surprise for Canoo would be an acquisition by a more established automaker that is interested in the intellectual property the company has developed to this point as well as a talent acquisition. These are speculative plays at best however and not usually a reason to scoop up shares.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.