How High Can Canoo (GOEV) Stock Go on Reddit Short Squeeze?

Reddit group WallStreetBets has a flair for EV (electric vehicle) stocks. EV startup Canoo (GOEV) is currently among the most popular stocks in the group. GOEV stock has seen some upwards price action over the last few trading sessions on speculations of a short squeeze. What’s the forecast for GOEV stock and how high can it go?

This isn't the first time that Reddit traders have found love for this beaten-down EV stock. In June, Canoo gained traction on WallStreetBets, which led to a spike in its stock price. Apart from that, there's a separate subreddit with over 3,100 investors to discuss the stock. The group calls itself “long-term shareholders.”

Canoo stock has been going up amid its growing popularity among Reddit traders. There hasn’t been any news from the company for over a month now. The most recent update from Canoo was in August when it released its second-quarter earnings.

In its earnings for the second quarter of 2021, Canoo said that it has selected VDL Nedcar as a contract manufacturer and expects the production to start in the fourth quarter of 2022. The company also said that it has received over 9,500 non-binding pre-orders across different models.

Canoo said that it has sourced 87 percent of the components. Of course, there weren't any revenues since it's still a pre-revenue stage company. It reported an adjusted EBITDA loss of $76.7 million in the quarter.

GOEV has received two buy ratings, one hold rating, and one sell rating. Its median target price of $11 implies an upside of 48 percent over the current prices. The street high target price is $19, which represents an upside potential of over 155 percent. The street low target price of $5 is a discount of 32.7 percent over the current prices.

Reddit groups are bullish on GOEV stock for multiple reasons. Canoo CEO Tony Aquila has been increasing his stake in the company, which is a positive move. Many Reddit traders see it as a sign of his faith in the company.

A post on WallStreetBets, which was upvoted over 3,800 times compared Canoo’s valuation to that of other startup EV companies. GOEV currently has a market cap of just about $1.8 billion, which is below that of Fisker as well as Nikola. Lucid Motors has a humongous market cap of over $40 billion.

Since short squeezes have been a hallmark of Reddit traders, the post also talked about the high short interest in the stock.

The short interest in GOEV is around a third of the total float. According to Fintel, the FINRA short volume ratio was 54 percent on Sept. 23 and the short borrow fee was 4.75 percent. A high short interest combined with buying support from Reddit traders could trigger a short squeeze in the stock.

If Canoo hits its street-high target price, it could rise another 155 percent. While that might seem a bit too far-fetched, the short squeeze rally could take GOEV stock higher from the levels that it's currently trading at.

Canoo has gone through the short squeeze cycle more than once since its listing through the SPAC merger. After every spike, the stock has fallen subsequently. GOEV's valuations don’t look high at these prices especially compared to other EV companies.

The stock could deliver good returns over the long term if it can execute on the production and deliveries. Also, it would have to come up with a compelling product proposition as the EV market is set to become overcrowded over the next two years.