Investors have been extremely bearish about Mullen Automotive, Inc. (MULN) due to its mounting losses, declining market share, and increasing cash burn. The stock is expected to plunge further as it faces various challenges, including high inflation, supply chain disruptions, stiff competition in the EV space, and stringent government regulations.
The stock has been on a downward trajectory since its debut in late 2021. Given its weak fundamentals and the challenging macro environment, MULN will likely remain a poor performer and is best avoided now. In this article, I have discussed several reasons why investing in this auto stock could be risky.
Automotive and electric vehicle (EV) manufacturer MULN’s losses have compounded over the years. For the first quarter of fiscal 2023, the company’s loss from operations widened 423.7% year-over-year to $73.62 million. Its net loss attributable to shareholders worsened by 141.1% from the prior-year period to $376.91 million. Also, the company reported a net loss per share of $0.28.
Despite being highly ambitious, MULN is a cash-strapped company conducting additional capital raises. The company announced in its business update that it expects to begin production of the Mullen FIVE crossover vehicle by the fourth quarter of 2024 or the first quarter of 2025. In addition, it plans to start production of its Bollinger B4 semi-truck by the first quarter of 2024.
Meanwhile, to fund its operations and make acquisitions, MULN continues to issue shares, diluting the value for existing investors. The company is currently facing a major liquidity challenge, given that it is burning cash at a quick pace.
Furthermore, the company continues to face delisting risks. On March 8, 2023, Nasdaq approved MULN’s request for a 180-day extension to meet the $1 minimum bid price requirement. If the stock fails to trade above $1 for a minimum 10 consecutive business days prior to September 5, 2023, it will implement a reverse stock split to cure the deficiency before the additional 180-day compliance period expires.
Shares of MULN have declined 67.8% in price over the past six months and 84.2% over the past year to close the last trading session at $0.18. The stock is currently trading 95.7% below its 52-week high of $4.18, which it hit on March 21, 2022.
Here are the factors that could affect MULN’s performance in the upcoming months:
Disappointing Financials
For the fiscal 2023 first quarter that ended December 31, 2022, the pre-revenue company reported a loss from operations of $73.62 million, widening 423.7% year-over-year. MULN’s net loss attributable to common shareholders worsened 141.1% from the prior-year period to $59.47 million, while its net loss per share came in at $0.28.
In addition, cash outflows from operating and investing activities were $33.23 million and $93.72 million, up 125.8% and 795.8% year-over-year, respectively. As of December 31, 2022, MULN’s total liabilities were $420.20 million, compared to $145.64 million as of September 30, 2022.
Low Profitability
MULN’s trailing 12-month ROTC and ROTA of negative 144.39% and 217.65% are significantly lower than the industry averages of 6.32% and 4.07%, respectively. Also, the stock’s trailing 12-month cash from operations of negative $84.31 million compares to the industry average of $136 million.
POWR Ratings Reflect Bleak Prospects
MULN’s overall F rating translates to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MULN has an F grade for Stability. Its 24-month beta of 2.98 justifies its Stability grade. In addition, the stock has a D grade for Quality, consistent with its lower-than-industry profitability.
MULN is ranked #54 out of 65 stocks in the D-rated Auto & Vehicle Manufacturers industry.
Beyond what I have stated above, we have also given MULN grades for Sentiment, Growth, Value, and Momentum. Get all MULN ratings here.
Bottom Line
Automotive and EV manufacturer MULN’s stock has been on a downward trajectory since its debut in late 2021. It is currently trading below its 50-day and 200-day moving averages of $0.31 and $0.57, respectively. For a company with no revenues, mounting losses remain a significant concern.
Furthermore, the company faces serious cash problems and relies on an equity line of credit to fund its operations and make questionable acquisitions. Given its massive losses, low profitability, and continued share dilution, we think it could be wise to avoid this auto stock now.
Stocks to Consider Instead of Mullen Automotive, Inc. (MULN)
The odds of MULN staying afloat in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these three stocks rated A (Strong Buy) or B (Buy) from the Auto & Vehicle Manufacturers industry instead:
Stellantis N.V. (STLA)
Honda Motor Co. Ltd. ADR (HMC)
General Motors Co. (GM)
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MULN shares were trading at $0.18 per share on Friday morning, down $0.01 (-3.47%). Year-to-date, MULN has declined -37.06%, versus a 1.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Is It Time to Hit the Brakes on Mullen Automotive? StockNews.com
