The 99% crash in the share price of EV company Mullen Automotive Inc (NASDAQ: MULN) might tempt potential investors to wonder “Is Mullent stock a good buy?”. Could this former EV darling stage an impressive comeback?
Financially, Mullen Automotive shows some promise along with concern. As of June 30, 2023, it holds cash balances of $227.4 million and total assets of $600 million, with minimal debt at $7.3 million.
The company also reports first revenues of $308,000 for the quarter ending on June 30, 2023.
On the operational front, Mullen has made significant strides. It acquired a controlling interest in Bollinger Motors in September 2022 and completed the acquisition of Electric Last Mile Solutions (ELMS) in December 2022. The company also reports $279 million in purchase orders for its Class 1 and Class 3 EV Vans and Trucks.
MAEO and EMM - Product Performance Boost
In April 2023, Mullen Automotive joined forces with Global EV Technology and EV Technologies to form Mullen Advanced Energy Operations - MAEO. This joint venture aims to enhance battery efficiency across various applications, with a special emphasis on extending the range of electric vehicle batteries.
Mullen holds a 51% stake in MAEO, while EVT owns the remaining 49%.
The company also announced significant improvements in product performance by increasing the range of its vehicles using its recently acquired joint venture Energy Management Module (EMM) technology.
Following the joint venture's announcement, Mullen revealed test results from Element Materials Technology, a global testing, inspection, and certification leader.
The tests show that MAEO's Energy Management Module (EMM) technology boosts the range of a high-volume OEM electric vehicle by 60%, extending the driving range from 269 to 431 miles. Mullen engineers also tested the EMM technology on the company's Class 1 EV Cargo Van, showing a 75% increase in range for the 42-kWh lithium-ion battery pack.
The EMM technology is now being integrated into the final stages of product development and will be introduced across all Mullen commercial and consumer vehicle programs. A U.S. provisional patent application has been filed to cover the technology.
Mullen Automotive aims to license the EMM technology for use in electric vehicles across the automotive industry.
Who is Mullen Automotive?
Mullen Automotive Inc (NASDAQ: MULN) is a company located in southern California that produces electric vehicles (EV) for both passengers and commercial purposes. It was established on April 20, 2010, and operates from Brea, CA.
Mullen focuses on crafting the next wave of electric vehicles (EVs) in its two U.S.-based assembly plants. The company's EV lineup features the Mullen FIVE EV Crossover, Mullen I-GO Commercial Urban Delivery EV, and Mullen Commercial Class 1-3 EVs.
MULN also owns a majority stake in Bollinger Motors, which offers the B1 and B2 electric SUV trucks and Class 4-6 commercial vehicles. On September 7, 2022, Mullen acquired a majority ownership in Bollinger Motors. Later, on December 1, 2022, it completed the acquisition of Electric Last Mile Solutions' assets, including all intellectual property and a 650,000-square-foot plant in Mishawaka, Indiana.
Why is Mullen Stock Dropping?
The staggering 99% drop in Mullen Automotive's share price in 2023 can be attributed to a confluence of financial and operational challenges. As of Q2 2023, the company had not generated any revenue from vehicle sales, although revenue began to materialize in Q3.
Mullen's high cash burn rate—$34 million in Q2 alone—raises questions about its long-term viability. Adding to the concern is the company's decision to announce a $25 million stock buyback program in July, a move considered risky given its financial state.
Mullen also faces the daunting task of scaling production to fulfill $80 million worth of deals for its Class 3 EV trucks.
Having its stock trading below the $1 mark puts it at risk of being delisted from the NASDAQ index, further complicating its ability to raise future capital. These factors collectively contribute to the market's dwindling confidence in Mullen's prospects, leading to the sharp decline in its share price.
Furthermore, investor sentiment towards electric vehicle (EV) manufacturers has taken a negative turn. This shift in mood has been influenced by various factors such as an uncertain macroeconomic environment, financial instability, production challenges, lower-than-expected sales growth, and market saturation. Thus, affecting the overall confidence in the sector's growth and profitability.
Is Mullen Automotive Inc a long-term investment opportunity? Let’s take a closer look at the company's fundamentals to find out.
Why Is Fundamental Analysis Important?
Fundamentals represent a collection of essential indicators that, when evaluated collectively, can help determine if a company is a promising long-term investment. For many years, investors have utilized fundamental analysis to examine an organization's financial stability and potential for growth. By assessing these critical aspects, investors can make informed decisions about the viability of a particular investment.
On balance, stock prices are usually driven by a company’s financial performance over the long term, and it makes sense to analyze a company’s fundamentals in detail before deciding to invest.
What do Mullen Automotive Inc’s fundamentals tell us about the investment opportunity? Let's have a look.
Mullen Automotive Inc's Stock by the Numbers
First, let's look at Mullen Automotive Inc's EPS, which serves as an indicator of profitability. This metric is calculated by taking a company's net income (after dividends on preferred stock) and dividing this by the number of outstanding shares.
Based on its most recent financials, Mullen Automotive's EPS is negative because the company is not profitable, and earnings before interest and taxes (EBIT) have been plummeting year over year.
As a potential investor, it's crucial to examine a company's debt levels to gauge the investment risk associated with it. A high debt load can be a warning sign, especially if the company is unable to generate sufficient free cash flow to meet its debt obligations.
According to FactSet, MULN stock has a Total Debt / Enterprise Value = 0.26. This indicates that the company has a relatively low level of debt compared to its overall value. This ratio serves as a measure of financial leverage and risk, helping investors understand how much debt contributes to the financing of the enterprise.
In this case, a ratio of 0.26 suggests that only 26% of the enterprise's value comes from debt, while the remaining 74% likely comes from equity or other financing sources.
Generally, a lower ratio implies less financial risk, as the company relies less on external debt for its operations.
However, it's essential to consider this ratio in the context of the industry norms and the company's growth stage.
Mullen is low on cash reserves and obviously comes with considerable risk. Therefore, it may not be in a secure position to see it through the next 24 months without resorting to further share price dilution and fundraising.
Mullen CEO Letter to Shareholders
On August 23, 2023, David Michery, the CEO and Chairman of Mullen Automotive, addressed Mullen shareholders' concerns about the declining stock value of the company.
He expresses disappointment and frustration over the stock's performance, which he believes does not reflect the company's true value. Despite achieving significant corporate milestones, such as timely vehicle production, the stock faces downward pressure.
Michery reveals that the company has engaged Share Intel and other parties to investigate suspected unlawful trading practices. He reiterates his commitment to the company by mentioning his personal stock purchases and the company's Share Buy Back program.
Michery remains committed to executing the company's business plan and taking all necessary measures to eliminate any unlawful trading practices affecting the stock. He concludes by highlighting the company's recent successes, including partnerships, acquisitions, and production milestones, as a testament to its growth and potential.
Is Mullen a Good Investment?
The underlying trends at Mullen Automotive Inc. don't inspire much confidence. MULN is hemorrhaging money and is far from profitable.
Before making any investment decisions, it's essential to consider various factors beyond this general analysis based on historical data. This article doesn't account for your personal investment objectives or financial situation, nor does it examine macro factors such as geopolitical issues, internal company changes, or individual business practices that can significantly affect a company's long-term outlook.
With MULN becoming a speculative meme stock, investors frequently ask, "Is Mullen Automotive a good investment?" and "Should I buy MULN stock?".
Queries like "Is Mullen Automotive a buy?" and "Is Mullen stock a good buy?" often circulate in investment forums. With its recent acquisitions and expanding portfolio, some argue that Mullen Automotive is a good stock to buy but with many share owners burned, not all agree.
Listed on NASDAQ, MULN is sometimes mixed up as MAEO stock, but MAEO is the acronym for ‘Mullen Advanced Energy Operations’, a joint venture the company is involved in.
Like any investment, Mullen stock comes with its own set of risks and rewards. Therefore, those pondering "Is MULN a good investment?" or "Should I buy Mullen Automotive stock?" should conduct thorough research and consider their risk appetite and financial goals before buying MULN shares.
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