After Mulling Over Mullen Automotive, You'll Surely Choose to Avoid It InvestorPlace - Stock Market News, Stock Advice & Trading TipsMullen Automotive is very low in cash and can't seem to turn a profit, so you'd be hard-pressed to justify...
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Does the world really need another electric vehicle (EV) start-up? This is the question which California-headquartered Mullen Automotive (NASDAQ:MULN) — and really, anyone considering investing in MULN stock — will need to answer.
It's going to be difficult for Mullen to justify its existence, as there are plenty of EV manufacturers already and they all claim to be disruptors. Yet, what is Mullen Automotive really disrupting when other EV makers have already "been there, done that?"
As we'll discuss in a moment, MULN stock has sustained, profound technical damage. The shareholders can hope for a turnaround, but remember, hope is not a viable investing strategy.
Besides, a deep dive into Mullen's financials would turn the stomach of any conscientious accountant. At the end of the day, you'll undoubtedly seek EV-market wealth elsewhere.
MULN Stock at a Glance
MULN stock began trading on the Nasdaq exchange on Nov. 05, 2021. "The road ahead has never been brighter for Mullen," the company's chairman and CEO, David Michery, declared at that time.
As it turned out, however, the "road ahead" was actually quite painful for Mullen Automotive's investors. The share price was close to $12 on the day of the Nasdaq debut, but the situation rapidly deteriorated.
Alarmingly, MULN stock sank to the $5 area before 2021 was over. Then, in mid-February, the stock fell below the crucial $1 level.
This is important because the Nasdaq exchange has been known to sometimes delist stocks if they stay below $1 for too long. Furthermore, Mullen Automotive's investors would probably prefer not to be the owners of a penny stock (which can informally be defined as a stock that represents a small company and trades for less than $5 per share.)
There are no identifiable support levels to speak of here, as MULN stock can't seem to hold any significant price points. In the final analysis, traders have to remember low prices can always lead to lower prices. Mullen Automotive's investors, unfortunately, are learning this lesson the hard way.
Attractive Returns?
With so many EV start-ups on the market today, Mullen Automotive would need to be truly unique in order to have a competitive moat.
Where's Mullen's moat, then? The company brags about making its cars in the U.S. That's fine, but of course Mullen Automotive isn't the only EV manufacturer that's building vehicles in America.
The company also boasts about its "competitively priced EVs created for the american consumer." Seriously, "American" is in lowercase on the website.
Mullen Automotive isn't the only EV maker trying to work the affordability angle, though. Moreover, cheaper cars can mean reduced profit margins. Additionally, the company claims "attractive returns." We've already covered the horrendous performance of MULN stock. Need we say more about that?
Check the Financials
Maybe Mullen meant "attractive returns" for the company, rather than for the shareholders. Let's see if that holds up, then.
In a filing with the U.S. Securities and Exchange Commission (SEC), Mullen Automotive admitted, "Since inception, we have incurred significant accumulated losses of approximately $186.8 million, and management expects to continue to incur operating losses over the near future."
That's unsettling, wouldn't you agree? Venturing deeper into the data, Mullen incurred a net earnings loss of nearly $5 million in 2020's fourth quarter. Fast-forward to 2021's fourth quarter, and the company's net earnings loss ballooned to $36.5 million.
Now, here's a real shocker. At the end of 2021, Mullen Automotive had cash and cash equivalents totaling $360. No, not $360,000 or $360 million. We're literally talking about $360 here.
The Takeaway on MULN Stock
Clearly, Mullen Automotive's financials aren't indicative of "attractive returns." There are also concerns about Mullen's competitive moat, or the lack thereof. The company might imply it's unique among EV manufacturers, but is it really?
Perhaps worst of all, MULN stock is absolutely toxic on a technical level. It rose above $1 today, but the longer it lingers at these levels, the worse the situation gets. Therefore, it's wise to just avoid an investment in Mullen Automotive.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That's because these "penny stocks" are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com's writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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