Nikola (NKLA 7.23%) and Canoo (GOEV 2.59%) are electric vehicle (EV) makers, and both of them burned the bulls after they went public by merging with special-purpose acquisition companies (SPACs) in 2020. Nikola's stock closed at a record high of $79.73 on June 9, 2020, but it now trades at just over $1. Canoo's stock hit its all-time high of $22 on Dec. 10, 2020, but it's now worth less than $1.
These EV companies struggled to ramp up their production, broadly missed their pre-merger growth targets, and racked up steep losses. Should bold investors bet on either of these out-of-favor EV stocks today?
Image source: Nikola.
Nikola needs to put out figurative and literal fires
Nikola produces electric-powered semi trucks. In its pre-merger presentation, it claimed it could deliver 600 battery-powered electric vehicles (BEVs) in 2021, double its deliveries to 1,200 BEVs in 2022, then nearly triple its deliveries to 3,500 BEVs in 2023. It also said it could ship 2,000 hydrogen-powered fuel cell vehicles (FCEVs) in 2023.
However, Nikola didn't actually deliver any commercial BEVs in 2021 and delivered only 131 BEVs in 2022. It originally aimed to deliver 250-300 BEVs this year, but it will likely miss that target by a mile after four battery-related fires recently drove it to recall most of its BEVs and suspend its sales of new BEVs. Nikola insists it can still ship its first FCEVs this year, but its dismal track record doesn't inspire much confidence in those plans.
But that's not all. Nikola's founder and former CEO Trevor Milton was convicted on fraud charges last October, and the company recently brought on its fourth CEO in as many years. It also approved a plan to double its share count so it could raise fresh cash by selling more shares, and recently offered more convertible notes at high interest rates.
On the bright side, Nikola raised more cash over the past year by selling more shares, liquidating its battery-pack subsidiary Romeo Power, divesting its European joint venture with Iveco, and laying off nearly a fourth of its employees.
It secured a $42 million grant from the California Transportation Commission to fund the construction of six hydrogen stations across Southern California with partner Voltera, and locked in a five-year order for "up to 50" FCEVs for the hydrogen fuel and transport equipment company BayoTech.
So if Nikola can resolve its BEV issues in a timely manner, it might still have a shot at expanding its nascent FCEV business. But Nikola is still drowning in red ink. In the first half of 2023, it generated $26 million in revenue by delivering 76 BEVs but racked up a net loss of $387 million. It ended the second quarter with $295 million in cash and equivalents, but that liquidity probably won't last too long as Nikola tries to ramp up its production of BEVs and FCEVs.
Canoo is still sinking
Canoo develops a lifestyle delivery vehicle (LDV) for consumers and businesses, a multi-purpose delivery vehicle (MPDV) for logistics services, and an electric pickup truck. Last July, it gained a lot of attention when Walmart (WMT -0.08%) agreed to buy 4,500 of its LDVs with an option to purchase up to 10,000 LDVs.
Prior to its merger, Canoo claimed it could sell 10,000 vehicles in 2022. But as of this writing, it hasn't mass produced a single commercial vehicle yet. Instead, it's only produced a few prototype and custom vehicles for Walmart, the U.S. Army, and NASA. It didn't generate any meaningful revenue in the first half of 2023, but it racked up a net loss of $162 million and ended the period with just $5 million in cash and equivalents.
Even though Canoo is running out of cash before it even ships its first vehicle, it insists it can start mass-producing its vehicles this year and achieve an annual production rate of 40,000 vehicles by the end of 2024. That target seems far too ambitious, and Canoo's previous CFO, Ken Magnet, lasted a mere seven months before abruptly leaving in late August.
Canoo has been gradually trimming its workforce to rein in its spending, but it's unclear how it can possibly ramp up its production without breaking its balance sheet. It also seems to be struggling with employee loyalty. Last December, Canoo sued several of its former executives for allegedly stealing trade secrets to launch a rival EV start-up called Harbinger.
Just like Nikola, Canoo is trying to raise more cash with secondary stock and convertible note offerings. It ended the second quarter with an order book of $3 billion, but it warns that "customers who have committed to purchase significant amounts of our vehicles may purchase significantly fewer vehicles than we currently anticipate or none at all" in its latest 10-Q filing.
The obvious winner: Nikola
I wouldn't touch either of these speculative EV stocks right now. But if I had to pick one over the other, I'd buy Nikola because it's actually delivering vehicles and has a stronger balance sheet than Canoo -- which is stuck up the creek without a paddle.
