Canoo Blasts Higher on DOD, NASA News...Is a Big Squeeze Ahead?

Key Points

• Cumulative net loss and persistent lack of revenue led Canoo investors to lose patience and dump the stock over the last couple of years.
• Last week, news of an expanded partnership with the DOD and delivery of three new electric vans to NASA drove shares 27% higher.
• Approximately 14% of Canoo’s float is held short, a significant enough amount to stoke a short squeeze rally.

In what’s been a strong recovery year for electric vehicle (EV) makers, Canoo Inc. NYSE: GOEV has mostly gone against the tide. Last month, shares of the California-based EV longshot slipped to a record low of $0.41, extending a dreadful reversal from nearly $25.00. 

In July 2023 though, Canoo is moving upstream fast. Last week, the company was buoyed by news of an expanded partnership with the U.S. Department of Defense — but not around EV purchases. Instead, Canoo announced that the DOD’s Defense Innovation Unit (DIU) will work with it to develop a high-powered battery pack for potential military operations. The collaboration comes after the DIU spent several months testing Canoo’s proprietary battery technology.

If this next phase of the collaboration is successful, it could set the stage for the U.S. Navy’s increased use of energy dense lithium batteries. Canoo has already supplied a light tactical vehicle (LTV) to the U.S. Army. A widening scope with U.S. military branches is a bullish development for Canoo because it validates its commercial EV capabilities.

The DOD news set the stage for even bigger news two days later when Canoo delivered three new electric vans to the National Aeronautics and Space Administration (NASA). NASA’s Kennedy Space Center in Florida will use the Crew Transportation Vehicles (CTVs) to transport astronauts to the Artemis launchpad for lunar missions. The 10-day Artemis II expedition is expected to be the first manned mission in NASA’s plan to inhabit the moon long-term for deep space exploration.  

While the drive to the launchpad is less than 10 miles, the news drove Canoo shares 27% higher to $0.71 on Friday.

What Is Canoo’s Growth Outlook?

Canoo is developing a range of purpose-built electric vehicles based on its unique modular platform. Although its initial thrust is the commercial EV space, it is also moving forward with passenger EVs for consumers that have unusual needs and tastes. The bold, Lego-like lifestyle vehicle and pickup truck are both currently available for pre-order.

Meanwhile, Canoo’s electric delivery vehicles (EDVs) are gaining traction with environment-minded fleet operators. Last year, Walmart agreed to purchase 4,500 Canoo EDVs to support its growing e-commerce business. Fleet management groups Zeeba Automotive and Kingbee have signed deals to take on a combined 12,300 Canoo EVs.

Despite the positive order flow, however, Canoo’s production and delivery numbers have been far from electric. The company has still yet to book any revenue and has warned investors of the need to raise more funds to support a planned 2024 ramp.

Canoo is targeting a 20,000-unit run rate this year and hopes to double that in 2024. The company raised approximately $150 million during the first quarter of 2023 but exited the period with a tenuous $6.7 million cash position. 

Although it posted a narrower Q1 net loss, the EV challenger continues to build up big losses. The cumulative net loss and persistent lack of revenue have led investors to lose patience and dump the stock over the last couple of years. 

Does Canoo Have Short Squeeze Potential?

In all likelihood, much of Friday’s 27% jump was the result of short sellers covering their positions. The one-two bullish news punch may have proved too much to bear for Canoo bears. Many were probably spooked into purchasing shares to prevent bigger losses should Friday’s shifted tide turn into a monsoon. 

In the end, 189 million GOEV shares exchanged hands on a quiet summer Friday. Does this foretell an even bigger volume this week? It was the most the stock had seen since last summer when it spiked to $5.00 on the Walmart news. Short squeeze action was no doubt in play then and may be bubbling again. 

Approximately 14% of Canoo’s float is held short. Not as high as it once was, but still a significant enough amount to stoke a short squeeze rally — especially for a penny stock.

One thing in favor of the bulls is positive Wall Street sentiment. Last month, Stifel Nicholas began covering Canoo with a Buy rating and a $1.50 target. The two other analysts that actively follow the stock also call it a Buy. 

It’ll be interesting to see if GOEV builds momentum this week or if profit-taking rules. Whichever way the wind blows, Canoo always seems to be one headline away from an adventurous ride.