Seeking Alpha • Oct 07
Canoo: Saved From The Brink By Walmart
Summary
Canoo's deal with Walmart provides clear revenue visibility at a time when its future looked increasingly bleak.
Its dwindling cash balance is set to be boosted by a series of dilutive equity raises.
Management has pivoted again to outsourcing production of its Lifestyle Vehicle to a third party as executive departures mount.
Canoo's (GOEV) vehicles with their sleek and futuristic look have been described as space-age and a refreshing departure from established design consensus. This helped differentiate Canoo from a rush of EV companies that also went public via SPACs and contributed to investor enthusiasm for its common shares.
Canoo
However, it has failed to be translated into meaningful sales with the company still pre-revenue and fast burning through its dwindling cash reserves more than 2 years since it went public. Canoo's financial health and operational standing have since taken consecutive hits over the last few months with shares hitting new lows recently.
The company has since announced a deal to supply Walmart (WMT) with at least 4,500 of its Lifestyle Delivery vehicles. This represents a transformational change of fortunes and provides clear revenue visibility for fiscal 2023 and beyond. Further, Autonomy, an EV subscription startup, included Canoo in a list of 17 other automakers in a $1.2 billion purchase order. The company has also been selected by the US army to supply its Multi-Purpose Delivery Vehicle for analysis and demonstration. The scope for this to be transformed into a purchase order cements a great turnaround when aggregated with the broader operational momentum the company has garnered over the last few months.
Canoo x Walmart
The deal with Walmart will provide a material boost for struggling Canoo and would be even more transformational if Walmart activates its option to buy a further 5,500 vehicles for 10,000 in total. Canoo expects to start making deliveries to Walmart from the first quarter of 2023 in a deal that will also see Walmart issued with a warrant to purchase up to an aggregate of 61.1 million shares at an exercise price of $2.15 per share.
As part of the agreement, Canoo will not sell any of its vehicles to Amazon (AMZN) as production is also outsourced to an unspecified third-party contractor. This is a change from previous plans to assemble the Lifestyle Vehicle at its Bentonville, Arkansas factory. For Walmart, the Lifestyle Delivery Vehicle will allow for last-mile deliveries and will support its growing eCommerce business with 90% of the U.S. population within 10 miles of its stores. Whilst a significant operational win for Canoo, the management pivot to use a third-party contractor likely puts Bentonville, Arkansas-based Walmart in an awkward position as production being located in Walmart's home state of Arkansas was touted in the company's news release about the deal.
The main overhang that remains is whether the company has enough capital to see it through the next few quarters of growth. Indeed, Canoo last reported earnings for its fiscal 2022 second quarter which saw operating expenses come in at $173.5 million, up from $104.3 million in the year-ago quarter. Net loss at $164.4 million was also up from a year-ago figure of $112.6 million. The company ended the quarter with $36.5 million in cash and equivalents which is anemic against cash burn from operations that stood at $117.2 million during the quarter. Hence, the company has started to activate dilutive fundraising options to remain a going concern. The warrant deal with Walmart amounts to more than 20% of all the outstanding shares and should help the company raise enough money to get through to 2023. Further, Canoo has partnered with Yorkville Advisors to sell up to $250 million of its shares.Seeking Alpha • Sep 07
Canoo: Buy This Cheap EV Stock For The Long Term
Summary
Canoo is one of my favorite cheap EV stocks to buy under $5 for the long term.
The company received a massive 4,500 EV order from Walmart with the option to purchase an additional 5,500 EVs for 10,000 in total.
GOEV stock plans to start production in 2023 and looks like a safe buy at these current price levels.
Canoo (GOEV) is currently my favorite cheap EV stocks under $5 to buy right now. The company has changed quite a bit over the last several months even though investors are pricing GOEV stock based on its previous cash liquidity concerns.
The most notable news is the massive 4,500 EV order coming from Walmart (WMT) that certainly piqued my interest.
Another positive sign was a 200,000 share insider buy at an average price of $2.99 from Canoo CEO, Tony Aquila.
In this article, I'll cover the most important key points on why I'm bullish on GOEV stock over the long run.
Overview
Canoo is an EV maker based out of Bentonville, Arkansas that produces lifestyle, last-mile delivery, and pickup truck electric vehicles.
Canoo EV Models (Canoo.com)
The company isn't currently generating any revenue but plans to start producing EVs in early 2023. Canoo will produce its EVs in Arkansas and Oklahoma.
Just like most EV SPACs, Canoo is just getting started and has a lot of potential to disrupt the legacy automotive market.
A few months ago, Canoo looked like it was on the verge of bankruptcy until Walmart place a massive EV order that caught everyone's attention.
Walmart Order Details
On July 11th, 2022, Walmart entered an agreement with Canoo to purchase 4,500 last-mile delivery vans with an option to purchase an additional 5,500 EVs.
Canoo Walmart EV (Carpexpert.co.au)
Walmart already paid $300 million in advance for the initial EV order to boost Canoo's balance sheet and give the company enough cash to fund production.
Also, Canoo issued Walmart a warrant for 61.2 million shares at an exercise price of $2.15 per share. This is a huge bullish sign, and I wouldn't be surprised if Walmart exercised these warrants to own a stake in the company.
Amazon owns an $11.5 billion stake in Rivian (RIVN) and it makes sense that Walmart would own a major stake in Canoo to mimic Amazon's Rivian investment.
Without the Walmart Order, I highly doubt Canoo would have avoided bankruptcy due to its shaky financial situation.
However, I believe Canoo management made a smart move by moving the company headquarters to Bentonville, Arkansas (the same city that Walmart was founded in) to get closer to a key potential customer.
This is a huge milestone for not only Canoo but the entire EV industry because Walmart is the largest employer in the United States.
The EV movement slowed down a bit due to inflation concerns and a US recession, but major corporations continue laying down the groundwork for the inevitable transition in the future.
My Bullish Thesis
GOEV shares once traded at $10 after the SPAC IPO closed and now are down 62% over the last year.
GOEV data by YCharts
Canoo's market cap is around $800 million, making this a small-cap EV stock with lots of potential.
The Walmart order and 61.2 million shares via warrants is a major buy signal in my opinion.
Walmart already prepaid for its 4,500 EVs, which gives Canoo quick access to $300 million in revenue upfront. The $200 million at-the-market offering also frees up a lot more cash.
Capital expenditures were $65.4 million for the first 6 months of 2022.
The company only has $33 million on its balance sheet as of Q2 2022, but the Walmart prepayment and at-the-market offering mean Canoo can remain in business at least up until 2024.
New partnerships with the US Army and NASA add to Canoo's legitimacy as a future EV leader. However, GOEV stock has been crushed along with the entire EV industry lately.
Higher interest rates hurt growth stocks, but I think $2.15 is a solid price floor for GOEV shares. Canoo would be valued at a ~$600 Million market cap at $2.15, which is much closer to its 70 cents book value per share.
If Walmart orders the additional 5,550 EVs, then the entire order value will be worth $666 million. That would be more than the entire market cap if GOEV stock falls closer to $2.Seeking Alpha • Aug 21
Canoo: Yet Another SPAC Birthed EV Debacle
Today, we take our first look at Canoo Inc., an EV manufacturing concern that came public via a SPAC in late 2020.
Like so many EV names from that 'vintage', the stock has been a disaster to this point for shareholders.
Does new insider buying from the company's CEO portend a potential turnaround? An investment analysis follows in the paragraphs below.
Every generation laughs at the old fashions, but follows religiously the new. ― Henry David Thoreau
Today, we put Canoo Inc. (GOEV) in the spotlight for the first time. This EV related concern came public in December of 2020 as the result of it business combination between Canoo (CNOO) and Hennessy Capital Acquisition Corp. IV (HCAC). Like so many others that took a similar path to being a public company in 2020 and 2021, the result has been an absolute debacle for shareholders to this point. Recently the company's CEO purchased nearly $800,000 worth of shares. A sign of confidence in Canoo's long-term future? An analysis follows below.
Seeking Alpha
Company Overview
Canoo Inc. is based just outside of Los Angeles. The company designs and manufactures electric vehicles for the commercial and consumer markets in the United States. It has a variety of offerings it is working to deliver including lifestyle delivery vehicles, lifestyle vehicles, multi-purpose delivery vehicles, and pickups. The stock currently trades just above $3.50 a share and sports an approximate market capitalization of $1 billion.
August Company Presentation
The company has spent the past few years ramping up (vehicle design, testing, certification, building manufacturing capability, etc...) to the production stage of Canoo's journey. The company has purposely built flexibility into its manufacturing processes to be able to build a variety of different types of electric vehicles, both now and in the future.
August Company Presentation
Concurrently, the company has been booking pre-orders and believes it has an approximate $1 billion sales pipeline at this point. The start of production should commence sometime in the fourth quarter of this year. Leadership projects it will be producing at a 20,000 annual vehicle rate by the end of 2023.
August Company Presentation
In addition, the company has an important partnership with retailing giant Walmart (WMT) with the latter committed to buy 4,500 electric vehicles with the option to purchase up to 10,000 worth within that agreement. This agreement was just signed around six weeks ago. This deal also gave Walmart a warrant to purchase up to an aggregate of 61,160,011 shares at an exercise price of $2.15 per share in GOEV and the company cannot sell vehicles to Amazon (AMZN) as well. The warrant covers over 20% of all the outstanding shares in GOEV currently. Walmart will receive the first vehicles off Canoo's production line when it commences.
Second Quarter Results
On August 8th, the company posted its second quarter earnings report. Canoo had a GAAP loss of 68 cents a share for Q2. Just after quarter ended, the company signed the contract with Walmart as described above and Canoo has also now completed 90% of their structural crash testing in the quarter and are now moving to the final phase of Federal Motor Vehicle Safety Standard certification.
August Company Presentation
Operating expenses are accelerating as the company moves towards full production mode.
Analyst Commentary & Balance Sheet
Since second quarter results hit the wires, both H.C. Wainwright ($10 price target) and RF Lafferty ($15 price target) have reissued their Buy ratings on the stock while Roth Capital downgraded its view on Canoo to a Hold.
Unfortunately the insider purchase has been swamped by sales by other insiders. A beneficial owner has sold nearly $18 million worth of shares in July and so far in August. Three other officers of the company have disposed with approximately $440,000 worth of stock in aggregate over that time as well. In addition, it appears just over a quarter of the outstanding float of the stock is currently held short.
August Company Presentation
The company ended the second quarter of this year with just under $35 million of cash and marketable securities after burning through nearly $240 million worth of cash during the first half of 2022. The company also had access of up to $250 million, including approximately $220 million of unused capacity on its SEPA facility at that time. Canoo recently announced that it had signed a direct stock purchase deal to raise up to $200 million with Evercore Group L.L.C. and H.C. Wainwright & Co., LLC. The company access to funding to start up production is outlined below.
August Company Presentation
Verdict
The three analysts that cover this stock and have projections have wide ranges to their revenue and earnings expectations for the company in FY2022 and FY2023. This fiscal year, they have the company losing $1.40 to $2.42 a share on sales of anywhere between $1 million and $180 million. Next year they see continued losses in the $1.48 to $1.87 a share range as revenues soar to between $342 million to $605 million.
