Many high valuation, pre-revenue stocks have lost about half their value since November 2021. For some in that group, sell side analysts believe solid fundamentals suggest the stocks may eventually recover much of those losses. Canoo Inc. (NASDAQ: GOEV), a start-up electric vehicle (EV) manufacturer, fits into that first category but unfortunately does not seem to meet the second standard.
Canoo burned through about US$477 million in 2021, as its cash balance fell to US$225 million on December 31, 2021 from US$702 million at year-end 2020. Furthermore, the company expects its aggregate 1Q 2022 cash operating expenses and capital expenditures to range from US$155 million to US$195 million, implying its March 31, 2022 cash balance will be down to around US$50 million.
| (in thousands of U.S. dollars, except for shares outstanding) | 1Q 2022E | Full Year 2021 | 4Q 2021 | 3Q 2021 | 2Q 2021 |
| Operating Income | ($449,902) | ($141,480) | ($107,006) | ($104,346) | |
| Cash Operating Expenses | ($95,000) to ($115,000) | ||||
| Operating Cash Flow | ($300,816) | ($120,190) | ($71,803) | ($54,870) | |
| Capital Expenditures | ($60,000) to ($80,000) | ($162,728) | ($62,618) | ($71,457) | ($16,545) |
| Cash | $224,721 | $414,904 | $563,565 | ||
| Debt | $13,826 | $14,032 | $13,941 | ||
| Shares Outstanding (Millions) | 238.6 | 237.6 | 237.6 |
As a consequence, the company seems compelled to announce a significant equity raise fairly soon. After all, at its current pace of cash usage, its cash could be fully depleted by the end of April.
In mid-December 2021, Canoo boosted 2022 and 2023 production estimates of its flagship Lifestyle Vehicle. The electric car has a targeted starting sales price range of US$34,750 to US$49,950. It will initially be built at a facility in the U.S. state of Arkansas. In early 2024, manufacturing is expected to shift to its Mega Micro factory in Oklahoma.
The key issue for Canoo is that its 2022 revenue potential looks small versus its cash outlays. At the 4,500-unit midpoint of its production guidance and assuming a US$45,000 average sales price per electric car, Canoo’s 2022 revenue would be only about US$200 million, or just above its 1Q 2022 cash burn rate alone.
It is of course possible that EV investors will decide to focus on Canoo’s out-year LifeStyle Vehicle manufacturing projections and permit the company to raise needed equity at reasonable prices. This would give the company more flexibility and options in managing its operations.
Canoo is facing a cash squeeze as its current cash balance may be quite small, and the company needs to raise significant funds if it wants to be able to build its Lifestyle Vehicle. Canoo’s stock price, down about 60% since its late November 2021 peak, reflects some of this uncertainty. However, its enterprise value is still more than US$1 billion, remarkably high for a company in its situation.
Canoo Inc. last traded at US$5.44 on the NASDAQ.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Views expressed within are solely that of the author. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
