Mullen Automotive (NASDAQ: MULN) stock price has collapsed by more than 99.83% this year and is now hovering at its lowest level on record. This crash has brought its total market cap to about $52 million, down from its all-time high of over $650 million.
Mullen Automotive’s future outlookThe electric vehicle industry is going through major changes as demand for these products fades. On Tuesday, Ford delivered more bad news as it reduced its production target for Lightning.
Ford is not alone. General Motors has also reduced EV production as demand for its vehicles fell. As a result, the company is redirecting its resources to rewarding its shareholders through dividends and buybacks.
Dealers are also lamenting about weak demand for EVs even after the huge discounts and tax credits. Most EV companies have been forced to slash prices in a bid to meet their production targets.
Mullen Automotive has made some progress in the past few months. It has started delivering its Class 3 truck, which is selling for about $68k. This truck has a maximum payload of 5,316 lbs and is suitable for short distances. All trucks are being delivered to Randy Automotive, which made a $63 million order a few months ago
Our Tunica, MS, commercial assembly facility is buzzing with activity as we work to build and bring you the #MullenTHREE #EV trucks 🚚
Find out how you can add the versatile Mullen THREE #Class3 #ElectricTruck to your fleet today: https://t.co/ThQnMQf367 pic.twitter.com/bpWFE0AFuv
This is good progress, especially since it is targeting a niche area of the automotive industry. The challenge for Mullen is that its cash burn will likely continue for a while, which will force it to raise additional capital.
In its most recent results, Mullen Automotive said that it had secured $100 million in funding from its preferred stock investors. This new cash raise brought its total cash and equivalents to over $200 million.
Notably, Mullen is spending about $25 million buying back its stock, which the management believes is severely undervalued. This is a red flag since companies typically use their free cash flow (FCF) to buy back their stock.
Mullen is still burning huge sums of money as it ramps up production. Data compiled by SeekingAlpha shows that the company’s net loss has totaled over $1.4 billion in the past five quarters. It is losing over $100 million every quarter.
As we have seen with other EV companies, losses continue after they start delivering their vehicles. This means that the company will need to dilute its shareholders further.
MULN stock price forecast
I have been fairly bearish about the Mullen Automotive share price for a long time. In all of my articles, I have warned that the company’s future was bleak, thanks to the current EV trends and the need to raise cash. You can read my previous coverage here and here.
Mullen Automotive’s shares have crashed to a record low, meaning that the company will need to do another reverse split to meet the Nasdaq listing criteria. They remain below all moving averages. Therefore, I suspect that the stock will continue falling in the coming months, with the initial target being at $0.10.
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