What happened
Canoo (NASDAQ: GOEV) stock is seeing significant sell-offs in Wednesday's trading. The electric vehicle (EV) company's share price was down roughly 6.3% in the daily session as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence.
While there wasn't any fresh news directly related to Canoo's business, recent earnings results from another player in the EV space suggest that demand may be weakening in the market. Chinese automaker XPeng published its first-quarter results before the U.S. market opened this morning, with the company's performance in the period falling short of expectations and its forward guidance raising some red flags for the broader EV industry.
Image source: Canoo.
So what
While Canoo and XPeng are actually competitors, signs of weakening demand for electronic vehicles have generally been mounting -- and the latter company's recent Q1 report suggests that most players in the space will be facing these headwinds. XPeng's revenue fell 50% year over year to come in at 4.03 billion Chinese yuan ($571.6 million), and the company posted a net loss of 2.34 billion yuan -- or roughly $331.7 million, based on today's exchange rate. Meanwhile, the average analyst estimate had called for sales of 5.19 billion yuan and a net loss of 1.9 billion yuan.
While the sales and earnings misses in the quarter were substantial, the company's forward guidance looks even more concerning. For the current quarter, XPeng expects to deliver between 21,000 and 22,000 vehicles -- suggesting a year-over-year decline between 36.1% and 39%. In addition to spurring a share price decline for Canoo, the disappointing results and forecast also prompted sell-offs for other EV stocks, including Tesla and Nio.
Now what
Given that Canoo is on track to have far less exposure to the Chinese market than XPeng, it's not exposed to the same macroeconomic and region-specific pressures. On the other hand, it's easy to see why weak results for another EV company would spook investors.
Canoo is still gearing up to launch its first vehicles and remains a pre-revenue company. With signs that far more established players in the space are facing some tough headwinds, the prospects for early-stage upstarts are less promising.
Big sell-offs have pushed Canoo stock down roughly 97% from its high, but the company still has a highly speculative valuation. The EV specialist expects to produce 20,000 vehicles this year, and shares could rebound above current levels, but it has a lot of proving itself to do.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nio and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
