Canoo Slides After First Post SPAC-IPO Results, Business Model Pivot

Shares of Canoo (GOEV) are under pressure on Tuesday after the EV startup reported its first quarterly results post-SPAC-IPO. During the company's conference call, Canoo also said it would be deemphasizing engineering and engineering services. Calling the results OK but the "complete change in direction not," Roth analyst Craig Irwin downgraded the stock to Neutral.

RESULTS: 

Canoo reported fourth quarter losses per share of (8c) and said it sees first quarter operating expenses between $45M-$50M. The company also expects first quarter CapEx between $10M-$12M. First quarter expenses exclude stock-based compensation and depreciation.

"To transition to a best-in-class public automotive company," Renato Giger has been named as Interim CFO as Paul Balciunas steps down, Canoo said. During the company's conference call, the EV startup also said it would be deemphasizing engineering and engineering services as it accelerates from engineering-centric focus to operations and commercialization.

"We at the board really feel like the best thing to do is to accelerate our derivatives and focus our talent on creating IP for the company. You also have a lot of IP leakage when you do this work. And from my perspective, if I had been more involved earlier certainly, I certainly once I started – I invested and then I took the chairmanship, we started the analysis. I had concerns about this. If you study all OEMs, you can find a partnership or something like that if it makes sense. And we'll continue to look for things, but to be a contract engineering house is just really not going to drive the best shareholder value," Executive Chairman Tony Aquila explained during the Q&A portion of the company's conference call discussing the results.

MOVING TO THE SIDELINES: 

Roth Capital analyst Craig Irwin downgraded Canoo to Neutral from Buy with a price target of $12, down from $30, following the company's first post SPAC-IPO results. The analyst cited the "hard pivot" in the business model and a reset on operations, which are "clearly still ongoing." The difficult part is where the pivot points after the reset, as Canoo has de-emphasized engineering services done for others, pushed back from the subscription model for the lifestyle vehicle, and replaced its CFO and VPCorp. Strategy, Irwin contended. The analyst also pointed out that Chairman Tony Aquila announced that the company's original SPAC guidance through year-end 2025 is no long applicable given the transition in the business model. As a result, Irwin has pulled his 2023-2025 estimates.

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