Canoo shares soar 111% after Walmart orders 4,500 EVs
Canoo has warned of liquidity issues. Is this deal enough to keep it afloat?
Walmart’s (WMT) fleet of last-mile delivery vehicles is going electric, and the major US retailer tapped electric vehicle startup Canoo (GOEV) to help it get there.
Shares of Canoo surged Tuesday morning after the company announced that Walmart agreed to purchase 4,500 all-electric delivery vehicles. Walmart will use Canoo’s EVs to help it achieve its company goal of net-zero emissions by 2040.
Canoo stock skyrocketed as much as 111%, hitting a two-month high of $5. Despite Tuesday’s pop, the stock is still well below its all-time high of $24.90, which it hit the day after going public back in December 2020 via a SPAC merger. (Merging with a SPAC, or special purpose acquisition company, offers companies a simple way to go public than a traditional IPO).
Walmart shares gained about 1%.
Still, the deal is reassuring to Canoo investors, who have been watching other EV startups get squeezed out of the market and fearing Canoo will soon be next. Electric Last Mile Solutions (ELMS), another EV startup that went public via a SPAC deal, announced last month that it had filed for bankruptcy.
Will Canoo, which is dealing with its own liquidity issues, be next? Or has Walmart made it a buy?
Walmart orders 4,500 Canoo EVs with an option to buy up to 10,000
Canoo said Tuesday that Walmart signed an agreement to purchase 4,500 all-electric delivery vehicles, beginning with Canoo’s Lifestyle Delivery Vehicle (LDV), with the option to purchase up to 10,000 units total.
Canoo’s LDV is the commercial version of its lifestyle vehicle, a fully-electric minivan/SUV that’s equipped with a drive-by-wire system, which allows the vehicle to communicate with its wheels wirelessly. This eliminates mechanical components like the steering column and other cabin-intrusive components and allows for greater interior cargo space.
The LDV supports a 250-mile range using an 80 kWh battery and is capable of carrying up to a 1,464-lb payload. Canoo said in May 2021 that pricing of its Lifestyle Vehicles will range from $34,750 to $49,950 for its Delivery, Base and Premium models.
Walmart will be the first to receive Canoo’s LDV, which is slated to hit the road for Walmart deliveries in 2023.
“We are proud to have been selected by Walmart, one of the most sophisticated buyers in the world, to provide our high-tech, all-electric, American-made Lifestyle Delivery Vehicle to add to their impressive logistics capabilities,” said Canoo CEO and chair Tony Aquila. “Walmart’s massive store footprint provides a strategic advantage in today’s growing ‘Need it now’ mindset and an unmatched opportunity for growing EV demand, especially at today’s gas prices.”
Walmart will use Canoo’s LDVs to continue to build out its last-mile delivery network, which can already reach 80% of the US population with same-day delivery, according to Tuesday’s press release. Walmart uses a combination of store associates, independent contractors, third-party delivery service providers and, in some locations, autonomous vehicles and drones to make deliveries. The company’s goal is to achieve zero emissions by 2040.
“We’re thrilled to continue diversifying our last mile delivery fleet with Canoo’s unique and sustainably focused all-electric technology which will provide our associates with safe, ergonomic delivery vehicles,” said Walmart US senior vice president of innovation and automation David Guggina.
Canoo drives forward as its share price retreats
While Canoo’s stock has fallen over 80% in value since going public in December 2020, the EV-maker continues to make strides to expand its footprint in the overcrowded EV space.
The company said in May in conjunction with its first-quarter 2022 earnings results that it had 17,500 pre-orders with a projected value of $750 million and a growing pipeline of vehicles.
In April, Canoo announced that it had been selected by NASA to supply Crew Transportation Vehicles (CTVs) for crewed Artemis lunar exploration launches. Canoo’s CTVs will transport the Artemis crew to the launch site for what will be the first human lunar landing in more than 50 years.
Thinking of buying Canoo stock?
Shares of Canoo currently hold a Buy rating, with an average analyst price target of $11.25. This represents a potential upside of about 65% from the stock’s current price, according to Yahoo Finance.
That said, Canoo has had a turbulent history. It’s been the subject of an SEC investigation regarding the SPAC merger with Hennessy Capital Acquisition Corp. that took it public. It’s also been dogged by production delays.
Canoo warned investors in a May SEC filing that it might not be able to meet its financial obligations, saying there was “substantial doubt” about its ability to continue as a going concern and that its business plans “require a significant amount of capital.” The company had about $105 million in cash at the end of March and has access to another $600 million in funding.
Canoo reported a $125.4 million net loss in its first-quarter earnings, compared with a loss of $15.2 million in the same period last year. The company also more than doubled its cash burn, spending $120.3 million in the first three months of 2022, compared to $53.9 million in the same period last year.
For the second quarter, Canoo projects operating expenses of between $95 million and $115 million, as well as capital expenditures of $85 million to $105 million. The company is currently not generating revenue.
Tuesday’s deal with Walmart will be welcomed by investors, but it’s no guarantee of the company’s long-term success. If Electric Last Mile Solutions teaches us anything, it’s that starting a successful car company is very difficult and expensive. There’s a reason there’s a long list of now defunct automakers.
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At the time of publication, Matt Miczulski owned shares of RIVN and AMZN.
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