Canoo (GOEV -3.18%) was one of the many electric vehicle start-ups that went public by merging with a special purpose acquisition company (SPAC) in 2020. Just like many of those start-ups, Canoo initially impressed investors with some ambitious long-term forecasts but couldn't come anywhere close to meeting those projections.

Prior to going public, Canoo claimed it could generate $329 million in revenue in 2022 by selling 10,000 of its electric vans. But it didn't ship a single vehicle that year and it still hasn't mass-produced any vehicles yet.

As a result, its stock price plunged from an all-time high of $22 in December 2020 to less than $1 today. Is it too late to buy this out-of-favor EV maker? Or could it be a surprising turnaround play for daring investors?

Canoo's electric van.

Image source: Canoo.

Why can't Canoo ramp up its production?

Canoo develops three kinds of EVs: a lifestyle delivery vehicle (LDV) for consumers and businesses, a multipurpose delivery vehicle (MPDV) for logistics services, and an electric pickup truck. It's only produced a few prototype vehicles so far.

Canoo gained a lot of attention last July when Walmart agreed to buy 4,500 of its LDVs with an option to purchase up to 10,000 units. That deal sounded similar to Amazon's planned purchase of 100,000 electric delivery vans from Rivian, but Rivian has already been delivering its vehicles to Amazon, while Canoo hasn't sold a single mass-produced vehicle to Walmart yet.

Instead, Canoo has only been delivering a handful of prototype and custom vehicles to Walmart, the U.S. Army, and NASA for testing purposes. Those tests have generated a lot of buzz for the stock, but they're contributing nothing to its top-line growth. That's disappointing for a company that ended its latest quarter with an order book of $2.8 billion.

Canoo blamed its sluggish start on supply chain constraints for EV components, but it claims it will start mass producing its vehicles at its Oklahoma City factory -- which has an annual production capacity of 20,000 vehicles -- by the end of 2023. It believes its annual production run rate will double to 40,000 in 2024. Unfortunately, the pressure of that ambitious expansion could easily break Canoo's balance sheet.

How ugly is Canoo's balance sheet?

Canoo ended the first quarter with just $6.7 million in cash and equivalents, compared to $36.6 million at the end of 2022, with $174.8 million in current liabilities. It repeatedly tried to raise more cash with secondary share offerings, but that strategy boosted its number of weighted-average shares by 79% year over year in the first quarter.

Canoo still had a reasonable debt-to-equity ratio of 0.9 at the end of the first quarter, but that leverage will increase with its recent $45 million convertible debt offering. Considering that Canoo already racked up an operating loss of $81.5 million in the first quarter alone (before mass-producing any vehicles), that latest cash infusion probably won't last very long.

In its latest 10-Q filing, Canoo bluntly warns that it will likely "incur significant expenses and continuing losses for the foreseeable future," and that it "may be unable to adequately control the costs associated with our operations." It even says that management has "substantial doubt" in its "ability to continue" operating.

Investors should also remember that other younger EV makers like Rivian and Lucid, which are already producing thousands of vehicles annually, still aren't profitable yet. Therefore, Canoo's losses will likely widen -- instead of narrow -- as it tries to produce and deliver tens of thousands of vehicles. Based on Canoo's track record of overpromising and underdelivering, I seriously doubt it can manufacture 40,000 vehicles in 2024.

Is it too late to buy Canoo's stock?

Canoo's stock was crushed for obvious reasons, and it could even be delisted if it stays below the $1 threshold. It might pull off an 11th-hour recovery and actually ramp up its production by the end of the year, but the possibility of that happening before it runs out of cash seems minuscule. That's why I believe it's too late to buy Canoo's shares as a turnaround play right now -- especially when there are many better EV stocks to buy.