Founded in 2017, electric vehicle manufacturer Canoo Inc. (GOEV) is currently riding the electric vehicle (EV) boom, soaring 50.1% over the past nine months. The stock has gained 48.6% over the past year, beating benchmark S&P 500 index’s 17.1% returns. Moreover, GOEV’s year-to-date gain of 10.9% is higher than the returns of S&P 500, Nasdaq Composite and Dow Jones Industrial Average over this period.
The company’s unique product pipeline has caught investors’ attention. Its “skateboard” vehicle platform and “steer by wire” technology have the potential to disrupt the standard EV technology. Also, GOEV currently has two vehicles in its product portfolio, one designed for recreational and lifestyle uses, and the second is a multi-purpose delivery vehicle.
However, as a new player in the electric vehicle industry, we think GOEV has a long way to go before it can compete with highly profitable industry giants.
We expect the following factors are expected to shape GOEV’s performance in 2021:
Relatively New Player in a Highly Competitive Market
Founded three years ago, GOEV went public on December 22, 2020 through a SPAC merger with blank check company Hennessy Capital Acquisition Corp. First announced last August, the stock made its public debut via reverse merger nearly four months later. Before its merger with Hennessy Capital, GOEV was reportedly in talks with Apple, Inc. (AAPL) for a long term partnership or acquisition. However, the deal fell through, after which the company opted to execute a special purpose acquisition company merger to go public.
With a mere three years’ experience, GOEV is currently competing with established EV manufacturers with decades of industry experience and significant brand recognition and sales volume. While the company’s proprietary technology seems promising, it hasn’t yet released any vehicles or prototypes in the market that showcase the practical utility of its technology. Moreover, the news that AAPL reportedly walked away from a potential partnership with GOEV shed negative light on the company.
Trading at Sky-High Valuation
GOEV has an enterprise value of $811.30 million but has a market capitalization of $3.61 billion. The company has not generated revenues to date because it is still in the development stages of its operations. Its forward p/e ratio of negative 10.41 indicates its bleak earnings potential. Analysts expect the company’s EPS to remain negative in fiscal 2021. In terms of Enterprise Value/EBITDA, GOEV is currently trading at negative 7.91x.
POWR Ratings Reflect Bleak Outlook
GOEV has an overall rating of D, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system evaluates each stock on a total of eight different categories. It has an F grade for Value, and D for Growth. This is justified because GOEV has been trading at a premium valuation since its inception without generating revenues. Also, the company is currently planning to begin production in 2022 and to roll-out its vehicles in the market by 2023. Thus, GOEV has a long way to go before it can generate adequate profits to justify its valuation.
Better than GOEV: Click here to check out the top-rated stocks in the Auto & Vehicle Manufacturers industry.
As a new player in the electric vehicle industry, GOEV has a long way to go before it can compete with highly profitable industry giants. Also, it will take at least two years for the company to generate a stable revenue stream, subject to the market’s reception of its proprietary “skateboard” technology. Thus, we think GOEV is best avoided at current price levels given its dubious growth potential in the near future.
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GOEV shares were trading at $14.84 per share on Monday afternoon, down $0.47 (-3.07%). Year-to-date, GOEV has gained 7.54%, versus a 3.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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