What happened
Shares of Canoo (GOEV -8.52%) took off Tuesday morning, rising as much as 21.8% by 9:42 a.m. ET before giving up some of those gains. The electric vehicle (EV) stock was still up 10.4% as of 10:25 a.m. ET as investors found a glimmer of hope in its first-quarter earnings report that came out after market close yesterday.
So what
Canoo, which went public in 2020 via a merger with a special purpose acquisition company, is building electric vehicles with a mission to "bring EVs to everyone." The focus is on commercial delivery and lifestyle vehicles for now, built on a multipurpose platform that promises maximum cargo space. As of the end of the fourth quarter, Canoo claimed to have bagged total orders worth $2.8 billion.
Image source: Canoo.
That sounds promising, but Canoo is yet to produce and sell any vehicle commercially, which also means it is yet to generate any revenue.
No, Canoo didn't generate any revenue in the first quarter and continued to burn cash. So why did the stock fly high today? There are three reasons.
First, Canoo reported a lower net loss of $90.7 million for the quarter versus $125.4 million in the year-ago quarter. That's because Canoo's operating expenses, including research and development (R&D), fell 25% year over year in the quarter.
Second, Canoo secured a long-term lease for a 500,000-square-foot manufacturing facility in Oklahoma last quarter, paving the way for the company to scale up production.
Third and most importantly, Canoo said it expects to exit 2023 with an annual production rate of 20,000 vehicles. It expects to double production in 2024, and even turn gross profit-positive in 2025.
Now what
The prospect of an EV company finally manufacturing and delivering vehicles is exactly the kind of catalyst that can send a beleaguered stock higher. Yet it's too soon to call this an inflection point for Canoo, as having targets and meeting them are two different things. For Canoo, it's a tall task.
Canoo ended Q1 with only $6.7 million in cash and will require additional funds to invest in R&D, start production, and even run its day-to-day operations. Heck, Canoo just said its existing cash is "not sufficient to support planned operations for the next 12 months." I wouldn't touch such a stock with a 10-foot pole, no matter how promising its goals.
