Canoo stock stuck in “Neutral” at Roth

A trip to the company’s Texas facility has not moved Roth MKM analyst Craig Irwin off his “Neutral” rating on Canoo (Canoo Stock Quote, Chart, News, Analysts, Financials NASDAQ:GOEV), thought the analyst thinks the company is taking a cautious approach to production that could pay off in the long run.

“We visited Canoo CEO Tony Aquila and CFO Greg Ethridge at the Justin, TX facility for an update, and had the opportunity to test drive company vehicles,” the analyst wrote. “We were impressed how the LV and LDV vehicles seem ready for prime time, and noted a pair were dressed with logos for a test drive this week by an S&P 500 company operating one of the largest U.S. fleets. The most important takeaway from our meeting is that GOEV will ramp production ratably to get it right.”

The analyst said the company is more concerned with getting things right than volume right now.

“CEO Tony Aquila is focused on the production of Canoo’s first 3,000 units to get supply chains tight, manufacturing processes debugged, the workforce trained, and working capital investments optimized. Tony wryly explained he wants to avoid the manufacturing hell experienced in 2018 by Tesla.”

In a research update to clients April 5, Irwin maintained his “Neutral” rating and $4.00 price target on GOEV.

The analyst thinks GOEV will generate an EPS loss of $12.09 on revenue of $900,000 in fiscal 2023. He expects those numbers will improve to an EPS loss of $3.79 on a topline of $80.0-million in fiscal 2024.

“We see the ’24 revenue guide reflecting a possibly conservative ramp gated by the focus on manufacturing excellence,” Irwin added. “Mgmt expects 2024 rev of $50m-$100m vs. the $152.5m consensus at the time of 4Q23 results, and most of this rev will be generated in 4Q23. We maintain our $4.00 price target, using a 3.25x P/sales multiple on our 2024 revenue estimate of $80m. The P/sales multiple reflects the recent start of a gentle production ramp, available IRA subsidies, and a healthy order book.