Investors in embattled EV company Canoo (NASDAQ:GOEV) have not really gotten much of a break at all over the past few years. This year alone, GOEV stock is down 65%, and that is after an upward move of 50% in the stock price today.
Much of this downward pressure has come from investor demand shifting from speculative pre-revenue companies to those with strong and growing earnings prospects. An early stage EV maker that made a lot of noise following its SPAC IPO in 2020, Canoo has simply not lived up to the production timelines and expectations of investors, most of whom appear to be focused on other more likely winners in this space.
The EV sector as a whole has been beaten down by a number of macro headwinds as well, from falling demand expectations to inflationary supply costs and rising interest rates (also hurting demand).
For Canoo, a recent price target cut from Alliance Global from $20 to $18.50 should have inspired more selling pressure, but it hasn’t. Let’s dive into why this may be the case.
Why Is GOEV Stock Surging Today?
There’s no apparent or definitive catalyst that appears to be driving GOEV stock higher today. But given a few factors, investors may be drawn to a simple conclusion — this stock may be seeing short squeeze interest from certain retail investors.
The company’s float is heavily shorted, with around 13.5% sold short as per data from Fintel. In combination with a low stock price (cheap options) and a relatively small market capitalization, there’s plenty of potential for investors to force short sellers out of their position, and potentially squeeze this stock higher.
This kind of momentum tends to breed more momentum, so we’ll have to see how this ultimately plays out. For now, investors looking to play beaten-down stocks for a near-term rally certainly have some bullish market sentiment supporting their cause. For companies like Canoo that have previously been under the radar, this squeeze kind of came out of left field. But that’s what makes markets, and I expect to see more volatility ahead if this rally continues into next week.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
