Last week, Walmart signed a definitive agreement with Canoo (GOEV) to buy 4,500 all-electric delivery vehicles, leading to a surge in its stock price. However, GOEV has had a track record of not reporting any revenue and has failed to start the mass production of vehicles. So, will it be wise to buy the stock now? Read on to learn our view.
Canoo Inc. (GOEV) is a mobility technology company engaged in designing, engineering, and developing electric vehicles (EVs) for the commercial and consumer markets. The company offers lifestyle delivery vehicles, lifestyle vehicles, multi-purpose delivery vehicles, and pickups.
GOEV's stock has gained close to 70% since the news release that Walmart Inc. (WMT) signed a definitive agreement with the company on July 12 to buy 4,500 all-electric delivery vehicles starting with the Lifestyle Delivery Vehicle (LDV).
WMT also has the option to buy up to 10,000 vehicles from GOEV. WMT seeks to use the EVs to deliver WMT's online orders, including InHome and Express Delivery.
GOEV's Investor, Chairman, and CEO Tony Aquila said, "We are proud to have been selected by Walmart, one of the most sophisticated buyers in the world, to provide our high-tech, all-electric, American-made Lifestyle Delivery Vehicle to add to their impressive logistics capabilities." "This is the winning algorithm to seriously compete in the last mile delivery race, globally," he added.
While WMT's agreement portrays a rosy growth picture, GOEV has failed to deliver a single commercial vehicle so far. In its SPAC presentation, the company projected that it could generate revenues of $329 million in 2022. But the company could not generate any revenue in the last reported quarter.
The stock has declined 48.2% in price year-to-date and 51.9% over the past year to close the last trading session at $4.
Here's what could influence GOEV's performance in the upcoming months:
GOEV's losses from operations widened 45% year-over-year to $140.78 million for the first quarter ended March 31, 2022. Its net loss widened 723.3% year-over-year to $125.36 million. In addition, its loss per share widened 671.4% year-over-year to $0.54.
Also, its cash, cash equivalents, and restricted cash declined 81.5% year-over-year to $118.62 million at the end of the period. Furthermore, its adjusted EBITDA loss widened 135.8% year-over-year to $117.42 million.
Unfavorable Analyst Estimates
GOEV's EPS for fiscal 2022 and 2023 is expected to remain negative. It failed to surpass Street EPS estimates in three of the trailing four quarters.
In terms of forward EV/S, GOEV's 8.20x is 646.6% higher than the 1.10x industry average. Likewise, its 8.79x forward P/S is 902.9% higher than the 0.88x industry average. And the stock's 3.83x trailing-12-month P/B is 85.9% higher than the 2.06x industry average.
GOEV's trailing-12-month ROCE is negative compared to the 17.15% industry average. Likewise, its trailing-12-month ROTC is negative compared to the 7.16% industry average. Furthermore, the stock's trailing-12-month ROA is negative compared to the industry average of 5.64%.
POWR Ratings Reflect Bleak Prospects
GOEV has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GOEV has a D grade for Value, consistent with its 8.79x forward P/S, which is 902.9% higher than the 0.88x industry average.
It has an F grade for Quality, in sync with its lower-than-industry profitability.
Since the news release about a "definitive agreement' to deliver 4,500 LDVs to big-box retailer WMT, GOEV's stock has gained 68.8%. However, the company has failed to keep the promises made during its SPAC presentation regarding generating revenues in 2022. Also, it has not been able to deliver a single commercial vehicle to date.
Furthermore, the company's liquidity position is dire, as its cash, cash equivalents, and restricted cash have declined 81.5% year-over-year to $118.62 million. Given its disappointing financials, unfavorable analyst estimates, stretched valuation, and lower-than-industry profitability, the stock is best avoided now.
How Does Canoo Inc. (GOEV) Stack Up Against Its Peers?
GOEV has an overall POWR Rating of F, equating to a Strong Sell. Therefore, one might want to consider investing in other Auto & Vehicle Manufacturers stocks with an A (Strong Buy) or B (Buy) rating, such as Honda Motor Co., Ltd. (HMC), Mercedes-Benz Group AG (DDAIF), and Stellantis N.V. (STLA).
GOEV shares were unchanged in premarket trading Wednesday. Year-to-date, GOEV has declined -48.19%, versus a -16.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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