What happened
Canoo (GOEV 4.75%) stock sank 35.5% in December, according to data from S&P Global Market Intelligence. The electric vehicle (EV) maker's share price crumbled in response to the spread of the coronavirus omicron variant and comments from the Federal Reserve suggesting a more challenging economic backdrop for growth.
Despite Canoo's significantly increasing its vehicle production guidance last month, the announcement wasn't enough to stop its stock price from getting crushed amid new sources of uncertainty. With the omicron variant signaling ongoing pandemic-related headwinds and the Fed seemingly on track to cut stimulus initiatives and raise interest rates, some investors abandoned the growth-dependent EV stock.
Image source: Canoo.
So what
The Federal Reserve looks poised to significantly reduce bond purchases and other stimulus initiatives in 2022, and it's also signaled that it could raise interest rates three times this year. This points to a more challenging economic backdrop for Canoo and other highly growth-dependent players in the EV space.
Canoo is still a very young player in the EV market, and it has yet to complete substantial vehicle production. To put its position in perspective, the company reported no revenue across its first three reported quarters in 2021. With Canoo yet to deliver significant sales, pandemic-related challenges and unfavorable macroeconomic changes can be expected to have a particularly pronounced impact on its stock price.
However, it wasn't all bad news for Canoo shareholders last month. The company published a press release on Dec. 15 announcing a significant hike in its vehicle production targets for 2022 and 2023 and laying out additional guidance through 2025. For 2022, the company now expects to produce between 3,000 and 6,000 EV units, up from its previous guidance for 500 and 1,000 units.
The company also now expects to produce between 14,000 and 17,000 units in 2023, shifting from its previous guidance for production of 15,000 units. Additionally, the company said that it expects to produce between 40,000 and 50,000 units in 2024 and between 70,000 and 80,000 units in 2025.
Now what
Canoo has a market capitalization of roughly $1.9 billion and is valued at approximately 16 times this year's expected sales. If the company can meet its recently outlined vehicle production targets and spur demand from consumers, it's possible that future performance will make the company's current valuation look cheap in hindsight. However, investors should keep in mind that there's plenty of uncertainty on the horizon, and it's far from assured that Canoo will meet its current targets and establish a lasting foothold in the competitive EV market.
