Lucid Group (LCID 0.41%) and Canoo (GOEV 2.59%) are both electric vehicle (EV) makers that went public by merging with special purpose acquisition companies (SPACs). Both companies also set lofty goals during their SPAC presentations, but subsequently disappointed their investors by broadly missing those targets.
Lucid, which went public in July 2021, initially told investors it could produce 20,000 vehicles in 2022 and 49,000 vehicles in 2023. But it only produced 7,180 vehicles in 2022, and now plans to produce "over 10,000" vehicles in 2023.
Canoo, which closed its merger in December 2020, predicted it would generate $329 million in revenue in 2022 by selling 10,000 vehicles. However, it actually generated $0 in revenue during the year, and didn't ship a single vehicle.
Image source: Lucid.
Those broken promises broke both stocks. Over the past 12 months, Lucid's stock plunged more than 70%. Canoo's stock sank 80%, and could be delisted if it remains below the $1 threshold. Should contrarian investors buy either of these out-of-favor EV stocks as a turnaround play for a new bull market?
The differences and similarities between Lucid and Canoo
Lucid's only vehicle so far is the Air sedan, a high-end EV that starts at $89,000 and boasts a longer range than Tesla's Model S. It plans to launch its second vehicle, the Gravity SUV, in early 2024.
Canoo is currently developing three types of EVs: a lifestyle delivery vehicle (LDV) for mainstream consumers and businesses, a multipurpose delivery vehicle (MPDV) for logistics services, and an electric pickup truck. It hasn't mass produced any of those vehicles yet, but Walmart agreed to buy 4,500 of its LDVs last July.
Both of these companies have attracted the attention of Saudi Arabian investors. Saudi Arabia's Public Investment Fund (PIF) already owns more than 60% of Lucid, and the Saudi Arabian government plans to buy 100,000 vehicles from Lucid over the following decade. Lucid believes that with the Saudi Arabian government's firm support, it can expand its annual capacity from 34,000 vehicles today to 500,000 vehicles in 2025.
This January, Canoo signed a deal with GCC Olayan, a subsidiary of the Olayan Saudi Holding Company (OSHCO), to distribute, sell, and service its EVs in Saudi Arabia. It opened up its first preorders for its LDVs and pickups in Saudi Arabia in April. Canoo believes it can finally start to mass produce its vehicles by the end of 2023 and expand its annual capacity to 20,000 vehicles, but investors should take those estimates with a grain of salt.
Which company is in better financial shape?
In 2022, Lucid generated $608 million in revenue but racked up a net loss of $2.56 billion. For 2023, analysts expect its revenue to rise 56% to $948 million as its net loss widens to $2.79 billion.
Lucid ended the first quarter of 2023 with $4.1 billion in total liquidity, which it claims will last through "at least" the second quarter of 2024. Its debt-to-equity ratio of 1 also gives it some breathing room to raise more funds.
Canoo posted a net loss of $488 million in 2022, and analysts only expect a slightly narrower loss of $369 million in 2023. They also expect it to finally generate $129 million in revenue as it starts to mass produce and deliver its vehicles this year.
But if Canoo doesn't ramp up its production soon, it could be in serious trouble, because it ended the first quarter of 2023 with only $6.7 million in cash and cash equivalents. Its debt-to-equity ratio of 1.1 suggests it could still raise some more cash as its coffers run dry, but it could struggle to gain fresh funds at reasonable rates in this tough market.
Lucid currently trades at 13 times this year's sales, while Canoo seems a lot cheaper at 2 times this year's sales. However, Canoo arguably deserves to trade at a much lower valuation because it isn't actually selling any vehicles yet.
The obvious winner: Lucid
Lucid and Canoo are both risky stocks, but the former is a better buy than the latter for three simple reasons: It's actually mass producing its vehicles, it has a lot of support from the Saudi Arabian government, and it has enough cash for at least another year. Canoo might eventually mount a comeback, but I wouldn't put too much faith in its long-term recovery until I actually see its first vehicles roll off the production line.
