Since it traded above $20 shortly after going public, shares of Canoo (NASDAQ:GOEV) have fallen back. What might be more concerning to investors is that GOEV stock has failed to recapture the $20 mark on multiple occasions.
And until a recent rally the stock looked like another EV company with the air coming out of its bubble.
All that changed when the company released news about its planned pickup truck to be launched in 2023. The trade press generally seemed to view the truck favorably.
A CNN reporter labeled the “cab forward” design as perhaps the “world’s cutest electric pickup.” Business Insider said the quirky design may have what it takes to compete favorably with the Tesla (NASDAQ:TSLA) Cybertruck, which may start delivering late in 2021.
However, Canoo won’t be releasing any models until 2023. That’s why any investor considering a position in GOEV stock needs patience.
Bullish on Innovation
What initially inspired investors to jump aboard the Canoo train is the company’s plan for a multipurpose delivery vehicle (MPDV). The MPDV showcases the versatility of the company’s skateboard chassis to maximize the usable space inside, giving the vehicle a party bus feel. And the company plans to lease the MPDV under a subscription model.
Luke Lango recently wrote why there is genius behind this “Transportation-as-a-Service” model:
One, it’s significantly higher margin. Because Canoo essentially “re-sells” the same vehicle multiple times throughout its life, the company generates significantly more revenue per vehicle than a legacy OEM, on the same cost basis, leading to 4x the margins on each vehicle.
And as I wrote back in January, the skateboard design should give Canoo a leg up when it comes to delivering a vehicle with autonomous driving capabilities.
The skateboard chassis will also be on display in Canoo’s pickup truck as well as a planned delivery van. Both of these models are being marketed with the intention of being owned. And on this point, I agree with my colleague Will Ashworth who theorized that having offerings in the commercial market takes a little bit of the risk premium off of GOEV stock.
How High Can Canoo Go?
As I noted above, like the MPDV, neither of these vehicles will be in production until 2023. In the meantime, other manufacturers will have time to bring models to market. And rem ember Canoo won’t be bringing in any revenue during this time.
At this time, only one analyst has issued a price target for Canoo. R.F. Lafferty initiated coverage on March 11 and gave GOEV stock a $23 price target. Of course we’re operating in a market where a stock can go as high as traders want to take it. But it’s not something to completely ignore.
Luke Lango may indeed be correct that GOEV can become a $200 stock. But right now there looks to be limited upside and not a lot of strong momentum. That could change should the company announce significant preorders.
Stay Small on GOEV Stock For Now
Overall, I remain cautiously bullish on GOEV stock. In what is becoming an increasingly crowded EV field, Canoo is offering something different. And I’m not just talking about the design. It’s also the subscription model for its passenger vehicle.
However, like many EV startups Canoo is a pre-revenue company. Its value is based on a lot of assumptions. And prudence acknowledges that some in the EV space will be flops. What is being termed a “cute” design today may not translate into sales. But then again, I’m old enough to remember when Cadillac tried to get cute with the Catera.
More significantly however is the fact that other EV manufacturers will likely beat Canoo to production. So how far of a deficit will the company have to overcome?
These are just a couple of issues that will take time to sort out. Until then my advice is the same as it was in January. GOEV stock is worth a small position with your fun money. And if you can get it below $15, that may be all the better. But before going all in on this speculative stock, make sure there’s something more than hype.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.