Why Canoo Stock Dived Today by Almost 12%
What happened
The combination of price cuts spreading through its industry and pullback from a hot buyout rumor really put the brakes on Canoo (NASDAQ: GOEV) stock Monday. The electric vehicle (EV) maker's share price fell by nearly 12% on the day, a far steeper decline than the 1.3% slip of the S&P 500 index.
So what
Frequently on the stock market, a company's value soars or swoons on developments outside its control. That was the situation over the past few trading days with Canoo.
The major item making the EV sector as a whole volatile was a hot rumor at the end of last week that the huge Saudi Public Investment Fund (PIF) was eager to buy the remainder of high-end EV car maker Lucid Motors (PIF already holds a more than 65% stake in the company).
But hot rumors in the market have a way of turning cold quickly if they don't come true. On Monday, Canoo and a host of other EV stocks that popped on Friday suffered pullbacks as a result.
Another major factor in the decline of such titles Monday -- Canoo included -- is that price cuts are starting to become quite the trend.
No less a manufacturer than Ford became the latest manufacturer to slice, announcing Monday that it is reducing the price of its Tesla-like EV, the Mustang Mach-E SUV, by an average of almost 6%. Tesla, of course, started the ride with its own round of cuts announced earlier this month.
Now what
All this makes the stocks of the lower-tier EV makers like Canoo feel like wait-and-sees at the moment. We're still watching to see how extensive, and how deep, these price cuts will go. Meanwhile, even if the PIF/Lucid rumors prove to be true and a big deal is agreed upon, this won't necessarily mean other EV companies will be targeted by the Fund or other well-capitalized investors.
10 stocks we like better than Canoo
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Canoo wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of January 9, 2023
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
