Canoo stock rose over 20% yesterday and was sharply higher in US premarket trading today. The stock is among the top 10 popular names on Reddit group WallStreetBets.
Canoo went public in 2020 in what was a red-hot year for green energy companies. All the green energy companies saw a rerating in 2020 as markets positioned themselves for a green future. Joe Biden’s election as the US president gave further wings to the rally in green energy stocks. Canoo stock made a 52-week high of $24.90.
Canoo stock has fallen from the highs
However, the rally in green energy stocks including Canoo lost steam as the initial euphoria died down and investors started to question these companies’ high valuation. Canoo went as low as $6.51 amid the sell-off in electric vehicle stocks. It joined the long list of companies that fell below the SPAC (special purpose acquisition company) IPO price of $10.
Talking of Canoo, it is a startup electric vehicle company like Fisker, Lucid Motors, and Nikola. Canoo plans to bring its first model to the market next year. Lucid Motors and Nikola plan to begin deliveries in 2021 only. The electric vehicle industry has become very crowded. On one hand, we have established pure-play electric vehicle companies like Tesla, NIO, Li Auto, and XPeng.
We also have a flurry of startup electric vehicle companies that are currently in the preproduction stage. However, over the next two years, we’ll have a lot of new all-electric models from these companies.
Also, legacy automakers like Ford, General Motors, and Volkswagen have raised their game. Legacy automakers’ all-electric models have received a good response from the market. The latest on the list is the Ford F-150 Lightning Model which has received very good reviews. The ICE (internal combustion engine) model was America’s best-selling pick-up for the last many years and the new all-electric model looks set to give a tough fight to other electric pick-up trucks. Canoo has also announced a pickup truck.
Meanwhile, the rally in Canoo stock has largely been due to the interest that WallStreetBets traders have shown. It is among the top 10 discussion topics on Reddit. After the sharp rise in names like Clover Health, BlackBerry, and AMC Entertainment, investors anticipate Canoo stock to rise even higher amid the short squeeze triggered by WallStreetBets.
Canoo to launch vehicles next year
Canoo prides itself as a distinguished electric car company that produces vehicles for the masses. After beginning deliveries in 2022, it intends to scale up the production to 15,000 units the next year. The first model would be a lifestyle vehicle named Canoo. The company is taking preorders for its vehicles with a deposit of $100.
“We are in the gamma phase – which is critical to deliver the highest safety standards, reduce the chance of costly recalls and increase customer satisfaction – all of which will enhance our long-term return on capital,” said Canoo CEO Tony Aquila during the first-quarter earnings call. He added, “in order to expand our technological lead, we entered into our first research partnership with UW-Madison to catalyze our groundbreaking advances in electric vehicles – and accelerate our innovation and IP development.”
Canoo stock target price
According to the data compiled by CNN Business, Canoo stock has a median target price of $7 which is a 35% discount over current prices. The stock has one buy, one hold, and one sell rating. Canoo stock was out of favor with markets for a long but Reddit traders seem to see value in this beaten-down electric vehicle company.
In the first quarter, GameStop was the poster child of the short squeeze triggered by WallStreetBets as hedge funds lost billions betting against the gaming retailer. In the current round of short squeeze, AMC Entertainment has been the most visible name. The stock went above its first-quarter highs and the management capitalized on the spike by issuing new shares.
AMC Entertainment is the latest poster boy of meme stocks
Meanwhile, in its SEC filing, AMC also warned investors of the risks which hold true for Canoo investors also. “We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” said AMC in its filing. It added, “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
Canoo stock was almost 13% higher in US premarkets trading today as the stock looks to continue its momentum from yesterday. Stock futures point to a flat opening for US markets today.
How to invest in Canoo stock?
You can invest in electric vehicle stocks like Canoo through any of the reputed online stockbrokers. Alternatively, if you wish to trade derivatives, we also have reviewed a list of derivative brokers you can consider.
An alternative approach to investing in the green energy ecosystem could be to invest in ETFs that invest in clean energy companies like Canoo.
Through a clean energy ETF, you can diversify your risks across many companies instead of just investing in a few companies. While this may mean that you might miss out on “home runs” you would also not end up owning the worst performing stocks in your portfolio.
By investing in an ETF, one gets returns that are linked to the underlying index after accounting for the fees and other transaction costs. There is also a guide on how to trade in ETFs.