By Investing Pioneer – 12:59 PM EST – November 9
Mullen Automotives (NASDAQ: MULN) is no stranger to attention, especially amongst the online investment community. This will be a review and analysis of the prospects of the company.
Mullen is an EV automotive company based out of southern California. Their website says,
“Because at the end of the day, clean transportation should not be a luxury, but a necessity.”
In common fashion with the EV companies of today, they are not profitable.
Hence reflexively, I must preface by stressing such securities are of higher risk due their speculative nature, and should therefore be treated as such when reviewing other aspects of the company, and determining whether one should invest.
Reaching heights of over $16 dollars per share in July of 2020, representing an increase in the several hundreds of percent from prior troughs, some would say the stock and its investors merely experienced the speculative rallies of 2020-2021 due to extensive liquidity or credit coupled with investor excitement (the former fed into the latter).
Further, with a worsening macroeconomic environment (tightening conditions), investors become warier, and large rises are less common across all securities. However, these factors do not necessarily detract from the fundamentals of the business.
Of any security, both the short- and long-term prospects could outperform the trajectory of the broader markets. A good review consists of both macro- and sector and company analysis.
Most of this article will focus on the news released today, and if it changes the perceived trajectory of the company significantly.
A press release on November 9th (the day this article was published) shared a new, and potentially bullish catalyst for the stock, indicated by a 7.18% rise (as of 10:57 AM EST, 11/9/22). Though note, at a share price of $0.30 and a market cap of approximately $154 million, such price movements are relatively common (compared to say, an average large cap).
The press release states it has entered into an agreement with Newgate Motor group, which, according to Mullen is “One of Irelands most recognized Autogroups”.
Newgate shall serve as “the marketing, sales, distribution and servicing agent for the Mullen I-GO in Ireland and the United Kingdom.”
The release indicates a 500 vehicle a year purchase order.
This comes after Mullen announced in October of this year the I-GO™’s availability for the European markets, with a starting price of $11,999 plus VAT. At a low-price tag and small vehicle footprint, it could in theory suffer less from (or perform better in light of) any potential diminishment in discretionary spending for Europe due to the looming issues of worsening energy prices/shortages and inflation.
As for why the economy is suffering, an article I wrote here talks about that.
Further, the press release notes that the initial units purchased by Newgate will be used for demonstrations, marketing and sales opportunities with potential customers. They expect delivery end December 2022.
Something that drives the attractiveness and demand for electric vehicles in Europe is the cost ratio between electricity (usually directed by gas/L.N.G. costs) and petrol costs. Automobile economist Stefan Bratzel says, “The electricity price explosion could end up being an acute danger for vehicle transition, and we need to be damn careful about it.”
If the cost of electricity is much higher than the cost of petrol, electric car ownership becomes less attractive. Therefore, the macro-economic perspective for energy shortages, and the durability thereof need to be considered when determining the prospects of EV companies.
According to an article from Euronews however, the cost of charging is still lower than gasoline/petrol.
The question of to what extent gasoline prices could rise also remains. If they rise enough as well, electric vehicles could remain just as attractive.
Overall, the stock represents a speculative play with some positive developments and some downsides, which should be weighed accordingly. The relatively low vehicle price in the context of potential diminished discretionary spending could allow it to out-compete competitors.
Nonetheless, it’s financials in the context of a recession, inflation and rising rates don’t necessarily bode well – at least, according to the markets, as evident by its extraordinary decline in share price over the past several months. Whether it’s now a cheap stock, poised for upside, or will continue a bearish trend in stock price remains to be seen.