Market Briefing For Wednesday, Nov. 17 - The EV Edition

Raising expectations is exactly what Wall Street needed, to deny any sort of 'double-top' possibility for S&P (SPX). Perhaps that's why Goldman Sachs (GS) chose today to increase their target to 5100. We had already indicated 4800-5000, and not because we see the valuation, but just figured that as realistic given the limitations of downside the recent very minor shakeouts suggested.

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Some even used the pretext of softer Oil to buttress their optimism, and that's not a view I concur with, but also these are sometimes the same traders that were talking 100-130/bbl not so long ago. I'm with the 75-85 range for now, of course realizing any geopolitical crisis could trigger a move in-excess of that. I also note that as of today we're following the March WTI futures as December essentially becomes spot. We also continue to hold Chevron (CVX) very long-term.

But for now we'll devote much of this issue to the overly-hot EV market, and a contender for 'utilitarian' affordability that others have promised and so far not delivered. This is highly speculative, but has an interesting team and target.

In the last couple days I mentioned I was looking at a very speculative but not well-recognized additional EV play. There are two to consider, one was Solo (SOLO), which is the 3-wheel basically single-passenger vehicle (probably a good fit for college students but not adults, other than messenger services as a step-up from bicycles, scooters or skateboards :) perhaps ). Coming soon, but not as a particular selection here (at least for now).

The other is Canoo (GOEV), which we've heard a little about, given that the CEO is a recognized Dallas-area investor, who basically parted with his CEO who went to Apple (either Apple is eager for expertise in their 'car ventures' as is an ongoing speculation), who I believe had experience at Tesla (TSLA).

I've not had time to delve into all of this, and it's speculative since they've not built their factory yet, which will be two of them, in Oklahoma and in Arkansas. So looks like initial production in Torrence (California) will later shift there but it will be a couple years, so they contracted with the largest (and only?) builder in The Netherlands for their initial run of about 15,000 vehicles late next year.

What appeals to me is their 'aim' at the low-end of price but not low appeal. If they can pull this off (and who knows if they'll have to go to the well for funds while developing, so there is that aspect too) I suspect the 'Adventurer' will be a hit with millennials or younger. While you can't plug an EV into a 'tree' while romping around, I can imagine it as the new popular VW Wagen style (surfer popular) semi-camping vehicle, and American made.

Also whether in 'camper', van, delivery vehicle or pickup truck 'modes', they all are modular and share the same platform. This commonality makes for a simplistic approach to construction, keeps costs down and more. The Tesla influenced staff claims an improved design for battery placement, so as the graphics show, it's all pretty basic. But that's the point: half the price of most of the other offerings, and 'if' the range is good, the appeal may be pretty broad.

Again they have to execute on a lot of things and just recently signed the deal to build in The Netherlands initially, since they knew the clock's ticking on EV footholds, so they want one at a low price-point. So when I mentioned this in yesterday's remarks, I had no idea they were going to announce locations as were pending until last night, for their US plants, design and support locations. Those PR's were last evening and included statements from Governors in the two states (Arkansas and Oklahoma) with more details.

However it's all pretty aspirational for now. And the shares rallied today on the back of 'finally' having announced locations (I've not delved into financials as of yet, but the CEO was personally the wealthy seed money investor). Also it was another SPAC that fell in-half (seems to be a pattern I've noticed before), and often that allows rebounds or more into the following year. In this case it is already rebounding so I'd be cautious, but what we'll suggest (if interested at all) is to watch it, stick a toe in the water (sort of like with Rockley initially, but not at yet as enthusiastic as I was and remain with Rockley's potential (RKLY)).

I will give GOEV a speculative (for patient gamblers) entry of 9-10.20 'ish, and hope it makes it to 15-25 'if' they show more progress toward production. Also I chatted a bit about it this afternoon, in the 2nd video this evening. Reminds me a bit of our initial take on NIO, got in right, sold way too soon (partially as it was Chinese this isn't, but both are early-stage pre-mass production.

Like the (frustrating) Sorrento (SRNE) from the start (this is vastly different of course), it may be better to speculate with options rather than common stock, if at all. However premiums are also high. What we don't want is to own a modern car maker that becomes a 'Tucker' (of the late 1940's) which was advanced but it flopped (and basically run-over by the big-3). I don't know if Lucid (LCID) is one such stock, but it goes after the high-end, so reliability must equal Tesla, and that's a concern based on road-test reviews (about it's quirky aspects) I've seen.

There's very little promising 'half-price' EV (even versus the F-150 Lightning) American EV's out there, so Canoo has a good prospect of having necessary support. I know nothing of rumors of this being considered as a platform for Apple, though that makes sense. (The rumors likely come because of the 'hiring' of their CEO by better-paying Apple I suppose. However there are a couple guys out there who cut their teeth with Tesla and are now elsewhere.)

This is an exciting time to be looking at automotive. Ford has adopted to EV the best, and General Motors was earlier, but had some serious glitches on the way to better products. Tesla still dominates share, but even Elon 'might' be unsure about the future, given his recent sales that I speculated where a bit more than for 'tax' purposes. AEHR Test Systems (AEHR) has soared and is held as a dominant Silicon Carbide 'test' platform for wafers that are used in Tesla and presumably for more EV's. AMD also provides several chips for autos. At the same time the EV sector has become a replacement for the former MEME stocks, at least seemingly so. Hence caution but several clearly are in-play.

To end today's mostly-EV discussion, consider Canoo this way (in case I'm on the conservative side and I am), to look at the more optimistic angle: they have self-driving software (intended to be updated wirelessly like Tesla does), a massively expandable modular platform, Panasonic contracted for batteries and a unique pricing proposition. So market-cap comes up, if it were to do any move like Lucid did, then say a 200 BLN MC would be around $1000 / share. I'll not holdout for that, so if they can stay in business, maybe 20?

If I were to say something ridiculous I'll get slammed, but Canoo looks like the more likely Tesla competitor than the others commanding high valuations. Of course they have to surprise the market with accelerating their time-table, or something. Otherwise you won't see low-volume product shipped for awhile, but of course you don't see that from the other contenders either. Part of my optimism might be the guy behind it, unlike Lordstown / Workhorse or even NIO (which worked-out, but had Government help in China).

At the moment the EV sector is pretty hot, there is nothing 'in theory' really to compete with what Canoo plans for the 'low-end', so there was no alternative but to delve into this today. Also we hear rumors (which may be nothing more) related to Walmart or to Apple (either as outlet or backer or both), and there's a reason so suspect either (one as an investment and the other due clearly to the movement of Canoo's old CEO to Apple, which was treated as negative by GOEV shares, but may not be. Rather it could be part of their plan).

Don't know, but will share what if anything we learn, and welcome input from you if you're familiar with the sector, and some of you are very well informed on it. Also some of their team came from Mercedes and another from BMW, and he was the architect of the i3 and hybrid i8, which I had the honor to sit in at their design center in Munich before either was released to the public. Point is they've assembled a team that is anything but flim-flam, so let's see in they can paddle this Canoo up the creek to happier 'lifestyle' camping grounds.

On that note (Canoo hits 12.55, trading millions on the Pacific, haven't seen anything quite like this... is it a new hot MEME stock birth?). I wish you a good evening and we'll see more dangerous S&P extension tries in the morning.

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for  more

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