Stock Market

Most of the commentary around Mullen Automotive (NASDAQ:MULN)stock is downright bearish. That’s fair, considering this is yet another early-stage EV company that’s on the ropes with respect to its cash burn rate relative to investor demand.

Equity markets aren’t as easy to tap as they were two years ago, and the cost of financing has soared, as have the probabilities of a recession. 

This is also a stock that appears to evoke powerful emotions from both bulls and bears. That makes sense, given the company’s relatively high short interest and the continuing Main Street vs. Wall Street battles we see over certain highly shorted stocks.

That said, I don’t have a dog in this fight, and I’m ambivalent regarding how this stock performs from here. So I thought I’d take the other side of the argument with this beaten-down name, and ask, “What’s the bull case here?”

MULN Mullen Automotive  $0.74

Some Recent Positives

Mullen recently reported advancements in solid-state battery testing, a promising area for EV market growth. Solid-state batteries offer advantages like increased energy density, faster charging, compact size, and enhanced safety compared to traditional lithium-ion cells.

The Battery Innovation Center’s president, Ben Wrightsman, confirmed that the test results aligned with expectations, and further evaluations will be conducted to assess overall capabilities and performance.

In September 2022, Mullen acquired a 60% controlling stake in Bollinger Motors for $148.2 million in cash and stock. This move allowed Mullen to expand into medium-duty trucks and meet the strong customer demand in sectors like delivery, telecoms, and utilities.

Mullen Automotive has been highly engaged recently, expanding its services beyond the private sector to include the public sector. Mullen Advanced Energy Operations (MAEO), a subsidiary of Mullen Automotive, has secured a $680,000 contract from the District of Columbia through EV Technologies, LLC.

In addition, Mullen Automotive has expanded its reach to higher education institutions, as evidenced by a recent purchase order for EV cargo vans from the University of North Carolina at Charlotte.

The company has also secured a substantial $63 million order for 1,000 electric trucks from automotive dealer Randy Marion Automotive Group (RMAG). Brad Sigmon, fleet general manager and vice president of RMAG Fleet Operations, expressed enthusiasm for Mullen’s commercial vehicles, particularly the Class 3 cab chassis.

A Bull Case Can Be Made

Mullen Automotive’s financial position can be viewed as relatively stable, depending upon who you ask. If the company continues to see its order book grow, perhaps it can defy critics’ assumptions. And if Mullen’s affordable commercial vehicle can be produced at a positive margin, the sky’s the limit.

It’s just that there’s so many unknowns.

Mullen Automotive’s strategic decision to offer an electric cargo van at an affordable price (its Mullen ONE Class 1 Urban Delivery EV Cargo Van goes for only $27,000 after the $7,500 U.S. federal tax credit) is a potential game-changer, positioning the company as a top choice for businesses seeking cost-effective electric cargo vans.

However, of course, there’s significant execution risk with buying a stock like this, at this stage in the cycle. Thus, it’s a risk-reward type of bet gamblers and speculators may like, particularly using options to capture big near-term swings on any sort of short squeeze-related news flow. 

Bottom Line

The bull case on Mullen appears to be this: overall EV market growth spurred by a long-term secular tailwind of electrification, combined with the company’s low-cost commercial vehicle line-up, uniquely position Mullen to capture significant market share in underserved areas of the EV space.

Makes sense. Let’s see if the company can execute, before it runs out of money.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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