Canoo (NASDAQ: GOEV) stock price has staged a strong comeback after the company delivered a reverse stock split last week. The shares surged by almost 50% on Friday, up by over 5% in the pre-market session. Still, despite this jump, the stock remains sharply lower than its all-time high.
Canoo latest newsThe main reason for the ongoing Canoo stock price is that the company has been approved for its registration as a Foreign Trade Zone (FTZ) in Oklahoma City. This approval makes it the first electric vehicle company to win that accreditation.
Canoo believes that the FTZ approval will bring about $70 million in estimated savings and duty deferrals in 2024 and 2025. In a statement, the company’s CEO said:
“We are proud to announce that we have achieved another important building block in our strategy by creating one of the largest Foreign Trade Zones in the State of Oklahoma. This FTZ will generate economic growth and American jobs.”
The announcement comes at a time when Canoo and other electric vehicle companies are going through a major challenge as demand fades and cash burn accelerates.
Most EV companies, including Canoo, Rivian, and Lucid Motors have been losing substantial sums of money in the past few years. The most recent results showed that Canoo’s net loss came in at $112 million in the third quarter. Its net loss stood at over $470 million in the last five quarters even though it has reduced its cash burn.
Canoo also has limited financial resources that it needs to manufacture its vehicles. It ended the previous quarter with $12.3 million in cash and short-term investments. These funds are not enough for a company that is looking to manufacture its vehicles.
According to Canoo, it raised about $45 million in 2023 from an investor, who left the room open for about $150 million in investments.
Canoo has some benefits, especially with its huge order book from organisations like USPS, Walmart, NASA, and Zeeba. As such, bulls believe that the company can use these orders to access its funds.
Canoo stock price forecast
The daily chart shows that the GOEV stock price has been in a strong bearish trend in the past few months. It has crashed from over $15 in September to about $1 today. The stock has remained below all moving averages.
A closer look shows that the stock has formed a falling wedge pattern, which is usually a bullish sign. Therefore, my view is that Canoo is a high-risk company because of its strong cash burn. The falling wedge pattern could lead to more upside as investors buy the dip.
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