Mullen Automotive Stock Price Risk/Reward Analysis 2023

DAX
DAX

Mullen Automotive stock price came back to earth in 2022 as the company fought multiple battles during the year. The MULN stock ended the year at $0.2835, which was a few points above the all-time low of $0.1905. It plunged by over 98% from its highest point during the year. Its total market cap plunged to about $474 million from its all-time high of almost a billion dollars. Here is a risk/reward analysis for MULN stock price.

Mullen Automotive risks

Mullen Automotive faces numerous risks in 2023. The most important risk, as I have written before, is that the company could go bankrupt in 2023 as its dilution and cash burn metrics rise. A key reason for this is that the company used its weak balance sheet to fund acquisitions of Bollinger Motors and Electric Last Mile Solutions (ELMS). 

Mullen, like other EV companies, has substantial cash burn and no revenue as it invests in its development. Therefore, with the Fed being committed on tight monetary policy, there is a likelihood that the company will struggle to raise enough funding in 2023. Besides, it has become a penny stock, which puts any fundraising hopes at risk.

The other risk is that Mullen Automotive will face challenges that other EV companies. In 2022, we saw those risks first-hand as Rivian issued a recall of all its vehicles. As shown below, recalls for new companies like Rivian can be highly expensive. Other companies like Tesla, Lucid, and Nio issued major recalls in 2022. 

The other main risk is competition in the EV industry and the rising cost of raw materials. We expect that key materials used in EV manufactures like lithium, nickel, and copper will see higher prices, which will affect its margins. The company also faces regulatory risks in 2023.

MULN stock opportunities

The only opportunity for the Mullen Automotive stock price is related to macro factors. After going through a major meltdown in 2023, there is a likelihood that EV stocks will rebound in 2023. Another macro factor is possibly a Fed pivot. 

With inflation and inflation expectations falling, there is a likelihood that the bank will pause its rate hikes and even deliver rate cuts in 2023. If this happens, it could lead to a rebound of tech stocks.

Mullen Automotive stock price forecast

The daily chart shows that the MULN share price had no relief in 2022 as concerns rose. The stock remains below the important level at $0.5171, which was the lowest point on February 25. It has continued falling below the 50-day and 100-day moving averages. The shares also moved below the descending trendline shown in black.

Therefore, the stock will likely continue falling to zero in 2023 as bankruptcy risks rise. A move below the resistance at $0.5171 will invalidate the bearish view.

Mullen Automotive stock