Canoo (GOEV 1.55%) and Gogoro (GGR 1.01%) are both electric vehicle makers that went public by merging with special purpose acquisition companies (SPACs) over the past two years.
Canoo, an Arkansas-based developer of electric-powered delivery vans, merged with Hennessy Capital Acquisition Corp. IV in December 2020. The combined company's stock started trading at $8.52 after the merger but now trades at $4 a share. Gogoro, which is based in Taiwan, is an electric scooter manufacturer and battery network operator. The company merged with Poema Global this April, and its stock started trading at $15.99 on the first day. But today, it's only worth $6 a share.
Image source: Gogoro.
Both EV stocks ran out of juice as rising interest rates drove investors toward more conservative investments. But could Canoo or Gogoro stage a stunning comeback as the markets stabilize over the next few years?
Canoo seems to be sinking
Investors were initially impressed with Canoo's electric-powered vans for delivery companies and large retailers. It also claimed it could generate additional revenue streams by renting out its EVs with subscriptions and charging service fees for EV-related engineering services. It had already forged an engineering partnership with Hyundai in late 2019, and it reportedly held talks with Apple to develop its secretive EV platform.
But shortly after its public debut, Canoo scrapped its subscription model and engineering service plans while ending its partnership with Hyundai. It previously told investors it could build 3,000 to 6,000 vehicles this year, but it's only built 39 prototype vehicles thus far and hasn't shipped a single commercial vehicle yet. Walmart recently agreed to buy 4,500 of Canoo's Lifestyle Delivery Vehicles (LDVs) if they launch next year, but there's no guarantee the company can actually produce that many vehicles.
Prior to its public debut, Canoo told investors it could grow its annual revenues from $120 million in 2021 to $4.13 billion in 2026, representing a compound annual growth rate of 103%. However, it hasn't generated any revenues so far, and it racked up net losses of $347 million in 2021 and $125 million in the first quarter of 2022. It only held $105 million in cash and equivalents at the end of the first quarter, so it will likely need to tap its $250 million equity line to kick off and ramp up its production.
Gogoro is still growing
Unlike Canoo, Gogoro already mass produces its electric vehicles. Back in 2015, it launched its first electric scooter along with the Gogoro Network: a nationwide network of charging stations across Taiwan that enables its riders to quickly swap out their depleted batteries for fully charged ones. Its scooters cost about $2,000 each and can travel over 100 miles on a single charge, and its riders pay additional monthly fees to access the Gogoro Network.
Gogoro's revenue fell 17% to $364.1 million in 2020 as its scooter sales slowed down during the pandemic, and it rose less than 1% to $366 million in 2021. Still deeply unprofitable, it posted widening net losses of $49.3 million in 2020 and $67.3 million in 2021 as it focused on expanding its loss-leading hardware business (scooters and charging stations) to lock in more riders. It also started to aggressively expand overseas, especially into China and India, after raising fresh funds with its SPAC-backed debut.
But in the first quarter of 2022, Gogoro's revenue surged 61% year over year to $94.5 million. Its hardware and other revenues jumped 87% to $65.1 million, and Gogoro Network's revenue rose 23% to $29.4 million. Its gross margin expanded year over year, but its net loss still widened from $19.2 million to $21.7 million as it increased its stock-based compensation expenses.
Gogoro's business looks a lot more sustainable than Canoo's, but it also made some bold promises during its pre-merger presentation last September. At the time, it claimed it could grow its revenue to $1.7 billion by 2024, which would require a jaw-dropping CAGR of 67% between 2021 and 2024. Analysts currently expect Gogoro to generate a more modest $1.4 billion in revenues by 2024 -- but that would still represent an impressive CAGR of 58%.
The obvious winner: Gogoro
Both EV stocks are extremely risky, but Gogoro is obviously a better buy. Canoo hasn't shipped a single vehicle, but it's already running dangerously low on cash. In contrast, Gogoro has already consistently shipped vehicles for the past seven years and locked riders into its sticky network subscriptions.
At three times this year's sales, Gogoro's stock also looks cheap relative to its long-term growth potential. Furthermore, its low enterprise value of $1.5 billion could make it a very attractive takeover target for larger companies.
