Canoo Bankruptcy Probability: Will GOEV Survive?

Canoo (GOEV) has a bankruptcy probability of 50% based on its shrinking cash on hand to fuel EV production. It’s possible that Canoo will borrow more funds or dilute shareholders to stay in business.

Canoo Overview

Canoo produces a unique and spacious electric vehicle that is built for the electric car revolution. It’s one of my favorite EV stocks under $1 that could explode if the company figures out a way to fund production before filing for bankruptcy.

The company has received several preorders this year from Walmart, Zeeba, and Kingpee totaling up to 34,050 vehicles with an order book value of $1.3 billion.

Will Canoo Survive?

EV startups usually lose money in the first few years of production while the company is growing quickly. That could be the only issue with GOEV stock moving forward because scaling up revenue requires either taking on debt or diluting shareholders through stock offerings.

Canoo is running out of money but has plenty of demand for its lifestyle EV. If the company can survive then GOEV stock could be one of the best cheap growth stocks to buy this decade.

The company moved its headquarters to Bentonville, Arkansas to work closely with Walmart so I don’t think Canoo has to worry about going bankrupt. Walmart is large enough that the retail and e-commerce king could buy Canoo due to its $325 million market cap.

More Reservations Will Come in Thanks to Walmart

Whenever Walmart signs a deal with your company, you know that a ton of smaller companies will follow its lead. That’s exactly what happened after Walmart agreed to purchase 4,500 last-mile delivery EV vans from Canoo.

Social proof is a real thing and now Canoo is becoming sought after for its spacious EV delivery vans. The company has signed two brand new deals since onboarding Walmart with Zeeba and Kingbee.

That’s over 34,000 EV reservations if all 3 companies order the max capacity. Now, Canoo has potentially over $1 billion in future revenue even though GOEV’s market cap is way less than $500 million.

There is a 50% margin of safety if you value GOEV stock at a P/S ratio of just 1. EV industry leader trades at a 10 times Price to Sales ratio, which shows Canoo is grossly undervalued.

Conclusion

I’m bullish on GOEV stock because it’s cheap and has plenty of growth potential. If you are okay with some future dilution then Canoo stock could work for you. I hold a small position as a lotto ticket and look forward to watching the company grow in the future.