1. High Profile Customers are Coming on Board
When Walmart announced a plan to purchase 4,500 Canoo electric delivery vehicles, it put an exclamation point on an amazing three-month stretch for the upstart EV maker.
In April 2022, we learned that Canoo’s multi-purpose EV platform is being used by NASA to transport Artemis Crew astronauts (and presumably cases of Tang) to the Kennedy Space Center for the first human moon landing since 1972!
Talk about mission critical!
The following month during Canoo’s Q1 update, CEO Tony Aquila struck an upbeat tone about the NASA win, the company’s blossoming relationships with state/federal governments, and EV production progress.
It wasn’t long before that Canoo appeared to be up a creek without a paddle.
Social media grumbled that the company may not have enough funds to bring its EVs to market. And with the stock market already not in the mood for unprofitable EV names, Canoo’s stock hit rock bottom.
Market sentiment soon improved.
Canoo secured $600 million in additional capital to help alleviate liquidity concerns.
Then high-profile customers like Walmart and NASA signed on. Things have taken a dramatic turn for the better.
We think Canoo is looking like the real deal!
The electrifying Walmart deal stipulates that the world’s largest retailer will buy an initial lot of Canoo’s ‘Lifestyle Delivery Vehicles’ (LDVs) to support its growing e-commerce business (and 2040 zero-emissions target). Walmart has the option to more than double the purchase to 10,000 vehicles.
LDV production is set to begin in Q4. A test run is currently underway in Dallas and the vehicles are slated to hit the roads nationwide next year.
(This could take some getting used to. You half expect a Star Wars character to roll out of that thing!)
With Walmart and Canoo being Bentonville, Arkansas neighbors, the possibility of an expanded relationship down the road seems likely.
More importantly, the Walmart deal legitimizes Canoo like nothing before.
The positive headlines around Canoo are also legitimizing the uptick in social media buzz.
LikeFolio’s proprietary data around consumer mentions of Canoo has drifted decidedly higher in recent weeks.
Check it out!
A lesser-known EV company left for dead has evolved into a social media buzzsaw!
On a rolling 30-day moving average, consumer mentions are up 143%!
Spikes in daily mentions have been frequent.
A popular user tweeted images of the next astronaut transport vehicles. Then came suggestions that Elon Musk should acquire Canoo.
Just two examples of the social media hype suddenly simmering around the company this summer.
Canoo’s newfound PR machine didn’t stop at the Walmart blockbuster.
Soon after, it dropped word that Canoo technology was selected by the U.S. Army for “analysis and demonstration” as it pertains to its potential use in military operations.
Still, it is delivery that is probably Canoo’s most exciting near-term growth opportunity.
That’s because the delivery van segment is one of the fastest-growing auto industry areas. An estimated 2 million more delivery vehicles will be needed globally by 2030.
2. Consumers are Lining Up
But let’s not forget about the massive consumer market. Momentum is building there too.
And if you’re going to dabble in the consumer EV market, pickup trucks and SUVs are where it’s at.
- Light duty vehicles like pickups and SUVs are responsible for approximately 60% of CO2 transportation emissions.
Makes sense then that Canoo would go after these markets.
The above chart shows that Canoo’s consumer purchase intent (PI) mentions have taken off. This tells us the buzz is about more than just Walmart and NASA.
Though the end of Q1, Canoo accumulated over 17,500 preorders (a 17% sequential increase) worth approximately $750 million. 1,000 alone came from the state of Arkansas.
Note: Canoo’s current market cap is just shy of $1 billion, meaning the stock is trading at a mere 1.3x ‘unrealized’ sales. Tesla trades around 15x sales.
Based on the data we’re seeing, Canoo’s order book is likely to have grown significantly since Q1. And it could continue to swell as Canoo’s product pipeline expands.
In the Q1 earnings call, Mr. Aquila made two important comments pertaining to sales:
- “We continue to move forward with sales discussion with several key partners.”
- “We solidly anticipate that we will be sold out this year and next.”
A few days later, social media buzzed about preordering a Canoo Lifestyle Vehicle (LV).
Among available colors and other features, people discussed how the LV can accommodate two full-size rear or front-facing child seats—and would be great for families.
The chatter has persisted. Although some of it stems from the Walmart/NASA news, a lot is based on Canoo’s intriguing LV lineup. Consumers are discussing things like which trim to get:
- The 5-seat Base with 350 horsepower and a 250-mile range?
- The 7-seat Premium with panoramic glass and 17 speakers? or
- The sporty Adventure with a lighted roof rack and 2,000 pounds towing capacity?
The LF staff is divided on the issue.
But we can all agree on one thing.
We can’t wait to hear the Q2 update!
3. Secular Trends are Accelerating
EVs accounted for 8.8% of global vehicle sales last year, twice their percentage in 2020.
By 2030, the International Energy Agency (IEA) projects that electric cars will represent more than 60% of new car sales.
No wonder so many new entrants are coming onto the EV scene.
This is also reason to believe there will be plenty of winners in the space.
The trends we are tracking related to EVs show that the groundwork is being laid for the longer-term EV growth story.
High prices at the pump are shining the spotlight on EVs as the transportation mode of the future. Consumers are biting the bullet on making that inevitable first EV purchase, some perhaps sooner than they expected.
At the corporate level, fuel and other inflationary pressures are accelerating demand for cost-effective vehicle types including EVs, hybrids, and concept vehicles.
We also wonder if the recent spate of flight cancellations is contributing to consumers’ EV purchase desires to satisfy pent-up travel demand.
You wouldn’t know it by most EV-related share prices, but in 2022, the stars are aligning for the EV industry.
Of course, Tesla had a huge head start in the U.S. and (due in large part to its CEO) garners most of the media attention.
Canoo, on the other hand, is a relative unknown and is just revving up. Only 17 of its ‘Gamma’ vehicles are on the road. From an investment perspective, we think this is a good thing.
With so many classes of EV’s—consumer and commercial cars, trucks, vans—and the sub-categories therein, we think several players will find success in their respective lane(s).
For Canoo, that niche will likely be delivery vans, pickups, and ‘modern minivans’. All seem to be gaining traction.
A major source of competitive edge could be the company’s unique, fully functional rolling chassis design. Dubbed the ‘Skateboard Platform’ (shown above), it is so self-contained that it can be driven independently!
The skateboard serves as the base for its entire fleet—and holds tremendous operating leverage potential.
We see this as a major differentiator for the brand. (And wonder if would be allowed in skateparks. Probably not.)
Where Canoo can also stand out from the crowd is its target market. A focus on tradespeople, utility services, and small businesses has the company dialed into a segmented but very large opportunity.
Yes, Canoo’s vehicle structure resembles a scaled-up version of our kids’ Lego creations. But when you’re in the rugged industries it serves, performance matters more than looks.
Speaking of performance, the stock has had a nice run off the bottom and July trading volume will smash the previous monthly high.
But there is still a lot of mileage required for it to return to the SPAC level and ~$25 peak. With 15% of the float held short, a squeeze could provide a head start.
Like many EV startups, profitability is also a distance away. However, Canoo is headed down the right path.
We love what we are seeing and are excited to come along for the ride!