Canoo shares rise as investors buy Reddit names

Canoo stock rose over 20% yesterday and was significantly higher in pre-market trading in the US today. The action is among the top 10 popular names on the Reddit WallStreetBets group.

Canoo went public in 2020 during a scorching year for green energy companies. All green energy companies saw a revaluation in 2020 as the markets positioned themselves for a green future. The election of Joe Biden as President of the United States has given new wings to the rally in green energy stocks. Canoo stock hit a 52-week high at $ 24.90.

Canoo’s stock fell from highs

However, the rally in green energy stocks, including Canoo, ran out of steam as the initial euphoria subsided and investors began to question the high valuation of these companies. Canoo fell to $ 6.51 amid selling EV inventory. He joined the long list of companies that fell below the SPAC (Special Purpose Acquisition Company) IPO price of $ 10.

Speaking of Canoo, it’s an electric vehicle startup like Fisker, Lucid Motors, and Nikola. Canoo plans to release its first model next year. Lucid Motors and Nikola plan to start deliveries only in 2021. The electric vehicle industry has become very crowded. On the one hand, we have created pure-play electric vehicle companies like You’re here, NIO, Li Auto and XPeng.

We also have a flurry of young electric vehicle companies that are currently in the pre-production phase. However, over the next couple of years we will have a lot of new all-electric models from these companies.

Historic automobile manufacturers

In addition, traditional car manufacturers like Ford, General Motors and Volkswagen have raised their level. All-electric models from legacy automakers were well received in the market. Last on the list is the Ford F-150 Lightning Model which has received very good reviews. The ICE (Internal Combustion Engine) model was the best-selling pickup in the United States for the past few years, and the new all-electric model looks set to wage a fierce battle against other electric pickups. Canoo also announced a pickup truck.

Meanwhile, the Canoo share rally is largely due to the interest shown by traders on WallStreetBets. It is among the top 10 talking points on Reddit. After the sharp rise of names like Clover Health, BlackBerry and AMC Entertainment, investors expect Canoo stock to rise even further amid the short squeeze triggered by WallStreetBets.

Canoo will launch vehicles next year

Canoo prides itself on being a distinguished electric car company that produces vehicles for the masses. After starting deliveries in 2022, it intends to increase production to 15,000 units next year. The first model would be a lifestyle vehicle named Canoo. The company takes pre-orders for its vehicles with a deposit of $ 100.

“We are in the gamma phase – which is critical to providing the highest safety standards, reducing the risk of costly recalls and increasing customer satisfaction – which will improve our return on capital in the long run,” said the Canoo CEO Tony Aquila at the Q1 earnings call. He added, “To extend our technological lead, we have entered into our first research partnership with UW-Madison to catalyze our revolutionary advancements in electric vehicles – and accelerate our innovation and IP development.

Canoo share price target

According to data compiled by CNN Business, Canoo stock has a median target price of $ 7, a 35% discount from current prices. The stock has a buy rating, a keep rating and a sell rating. Canoo stock hasn’t been favored by the markets for a long time, but traders at Reddit seem to see value in this broken-down electric vehicle business.

In the first quarter, GameStop was the child star of the short squeeze triggered by WallStreetBets as hedge funds lost billions in bets against the game retailer. In the current short squeeze cycle, AMC Entertainment has been the most visible name. The stock broke its first quarter highs and management took advantage of the rise by issuing new shares.

AMC Entertainment is the latest poster in Memes stocks

Meanwhile, in its SEC filing, AMC also cautioned investors about the risks that also apply to Canoo investors. “We believe that recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macroeconomic or sector fundamentals, and we don’t know how long that momentum will last,” AMC said on file. He added: “Under these circumstances, we do not recommend that you invest in our Class A common stock unless you are prepared to take the risk of losing all or a substantial part of your investment.”

Canoo stock was nearly 13% higher in the US pre-markets traded today as the stock appears to continue its momentum from yesterday. Stock futures indicate a flat opening for the US markets today.

How to invest in Canoo shares?

You can invest in shares of electric vehicles like Canoo through any of the reputable online brokers. Alternatively, if you are interested in trading derivatives, we have also looked at a list of derivatives brokers you can consider.

An alternative approach to investing in the green energy ecosystem could be to invest in ETFs that invest in clean energy companies like Canoo.

With a clean energy ETF, you can diversify your risk across many companies instead of investing in just a few companies. While this could mean you might miss home runs, you also won’t end up owning the worst performing stocks in your portfolio.

By investing in an ETF, you get returns linked to the underlying index after factoring in fees and other transaction costs. There is also a guide on how to trading ETFs.

About Irene J. O'Donnell

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