Today I’ll analyze and compare Mullen Automotive (MULN) and Cenntro Electric Group (CENN) to determine which electriv vehicle stock is currently a better buy.
The electric vehicle (EV) market is growing at a solid pace, with over 6.6 million EVs being sold across the globe in 2021, representing more than a 100% increase compared to 2020. In addition, EV market share soared from 4.11% in 2020 to 8.57% in 2021.
With the ongoing high demand for low emission vehicles and government support via subsidies and tax rebates, the global EV industry is anticipated to hit $802.81 billion by 2027, growing at a CAGR of 22.6%, Allied Market Research reports. Consequently, EV makers should benefit from the industry’s growth in the long term.
Founded in 2014, MULN is a California-based EV company that manufactures and distributes EVs. It also owns a digital platform known as CarHub that provides AI-powered solutions for buying, selling, and owning a car. Based in Freehold, New Jersey, CENN designs and produces electric light and medium-duty commercial vehicles.
Year-To-Date (YTD), shares of Mullen Automotive plunged about 85%, and CENN stock lost around 78% over the same period.
On February 7th, Mullen Automotive announced that it had strengthened its balance sheet with $4 million in funding. It was achieved through a combination of the initial drawdown of $2.5 million under a $30 million equity line from Esousa and debt financing from existing shareholders. As a result, the company has received about $40 million over the past two months due to its EV program. Mullen CEO David Michery said, “This financing represents one of several financial avenues that the company is pursuing to address the growth and demand for our electric vehicles.”
On January 21st, Cenntro Electric announced that it had achieved a major production milestone of 1,623 ECVs for 2021. In addition, the company produced 628 ECVs in December 2021, which is Cenntro’s highest volume in a single month. The company plans to continue expanding its core U.S. operations in 2022.
Recent Financial Performance
On February 14th, Mullen Automotive issued a 10-Q report for the quarter ended December 31st, 2021. The company hasn’t made any material revenues yet as it has not begun commercial operations.
The company’s General & Administrative costs totaled $12.9 million in the three months ended December 31, 2021, up 336.93% year-over-year due to increases in professional services, marketing, and payroll-related expenses. Mullen’s Research and Development expenses stood at $1.16 million versus $0.52 million as of 4Q2020. As a result, its net loss grew to $36.46 million, representing an enormous year-over-year increase of 482.63%.
With cash and cash equivalents of $0.61 million and total debt of $19.1 million, the company has a weak liquidity position, especially considering the cash burn rate of $14.71 million as of three months ended December 31st, 2021.
Cenntro Automotive Group hasn’t issued any earnings report after it was acquired by Naked Brand Group Limited. The company plans to report 2021 financials in early April 2022. However, let’s take a look at the Naked Brand Group Limited 6-K report to assess Cenntro Electric Group’s operating results for the first half of 2021 (page 168). In the first half of 2021, CENN’s total revenue has been reported at $2.46 million, driven by sales of its ECVs in key markets. Besides, the company’s gross margin was improved to 18.3% in 1H2021, compared to 10.4% as of FY2020.
On the expenses side, its total operating expenses came in at $4.98 million in 1H2021 primarily due to higher Research and Development expenses and General & Administrative costs. It translated into CENN’s net loss of $4.55 million.
With the close of the merger, the company ended 2021 with cash on hand of $250 million and no debt, which can support CENN’s growth plans in 2022.
Comparing Options Market Sentiment
Looking at the July 15th, 2022 option chain for both MULN and CENN, we can determine options market sentiment by comparing the calls/puts ratio. In MULN’s instance, the open calls/open puts ratio at the $1.00 strike price comes in at 2.59x, implying a bullish options market sentiment. When it comes to CENN, the open calls/open puts ratio at the $2.50 strike price stands at 5.16x, showing a relatively better market sentiment.
The Bottom Line
I believe CENN is a better investment than MULN at the moment. The company is already in the commercial stage with a broad range of commercial electric vehicles in its portfolio. The company has recently achieved a meaningful production milestone, confirming its intentions to capitalize on the industry’s growth. In addition, CENN’s overall financials and liquidity position look more attractive than MULN. Finally, CENN has a bullish long-term options market sentiment.
MULN shares fell $0.03 (-4.04%) in premarket trading Monday. Year-to-date, MULN has declined -85.85%, versus a -9.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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