In the EV horse race, you have your front-runners, your middle-of-the-pack names, as well as your stragglers. Based on the title of this article, you can guess pretty quickly which of these categories Mullen Automotive (NASDAQ:MULN) falls into, and hence, knows full well where the MULN stock forecast currently stands.
Check out recent headlines on this popular EV upstart, which seems to make significant progress. The same can’t be said about the stock. MULN has and will probably continue to spiral lower, chalk it up to the same factors driving its over 99.5% drop in recent years. While there’s little else to say but “stay away,” let me lay out the bear case for those still erroneously bullish.
MULN Stock Forecast: Why Shares Keep Slumping Despite Progress
Lately, Mullen Automotive has made progress in several areas. For one, the company made major progress ramping up production and delivery of its various lines of commercial vehicles. This, in turn, resulted in Mullen’s first fiscal year of revenue.
The company has also made progress with the development of its Mullen Five electric crossover vehicle for the passenger market, as well as with its efforts to develop solid-state batteries for its fleet. Yet while Mullen may move forward in terms of production and deliveries, the same can’t be said about the company’s financials.
These remain atrocious. While reaching the revenue stage last fiscal year (ending Sep. 30, 2023), total sales came in at just $366,000. Operating losses totaled $377.7 million, a nearly fourfold increase compared to the prior fiscal year.
To cover these losses and sustain itself, Mullen sold newly issued common stock, convertible preferred stock and warrants.
While keeping the lights on, issuing these securities to raise capital has led to further heavy dilution, the root cause of MULN stock’s price declines, and the key reason the MULN stock forecast remains very grim, even for a low-quality EV stock.
No End in Sight for This Downward Spiral
I am bearish on other EV stocks besides Mullen. However, while downbeat about “middle-of-the-pack” contenders like Lucid Group (NASDAQ:LCID), that company’s potential downside pales compared to the downside risk at hand with MULN.
Mostly, because the extent of likely future operating losses, and the extent of likely future shareholder dilution, is far greater with Mullen Automotive.
Given the spate of press releases issued in the past month-and-a-half alone, Mullen is not slowing down with its expansion efforts. To finance this expansion, Mullen will need to do what it does best: raise more capital through the sale of new stock and convertible securities.
While on the surface it may seem strange why institutional investors will fund a perennial money loser, as InvestorPlace’s Thomas Yeung recently detailed, the “death spiral financing” has terms quite profitable to the backers at the expense of common shareholders.
Hence, the MULN stock forecast is crystal clear. Assuming that preferred stock/warrant buyers remain able to convert these securities into common stock at a substantial discount, quickly flipping them in the public market, there’s no end in sight to the MULN downward spiral.
A ‘No Go’ for All Investors
Other electric vehicle upstarts, including some that face long-shot odds, may just well prove their skeptics wrong, and ultimately become successful investors for those unafraid to buy them while out of favor.
However, don’t count on that happening for Mullen Automotive. It appears very likely that, during 2024, Mullen will keep on raising more capital. With its various EV projects years away from scaling up to the point of profitability, high losses and shareholder dilution will persist.
To maintain its NASDAQ market listing, Mullen will keep on reverse-splitting shares, as it’s done before, most recently in December. However, on a split-adjusted basis, chances are even those buying MULN today will end up deep underwater on their positions.
With continued decimation of shareholder value in the MULN stock forecast, Mullen is a “no go” for all investors.
MULN stock earns an F rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.