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In 2022, Mullen Automotive’s stock price plummeted as the company faced numerous challenges. The stock ended the year at $0.2835, just above its all-time low of $0.1905, having fallen by over 98% from its peak during the year. This sharp decline reduced its market cap to around $474 million, down from nearly a billion dollars. Here’s a risk/reward analysis for Mullen’s stock in 2023.
Mullen Automotive faces several significant risks in 2023. One of the most pressing concerns is the possibility of bankruptcy, as the company’s financial situation continues to worsen due to rising dilution and cash burn. Mullen’s acquisition of Bollinger Motors and Electric Last Mile Solutions (ELMS) has strained its already weak balance sheet.
Like other EV companies, Mullen is burning through cash without generating revenue as it invests in development. With the Federal Reserve committed to a tight monetary policy, the company may struggle to secure additional funding in 2023. Moreover, being a penny stock further complicates its ability to raise capital.
Mullen also faces challenges common to other EV manufacturers. In 2022, companies like Rivian, Tesla, Lucid, and Nio all issued costly recalls. Such recalls can be particularly burdensome for newer companies like Mullen. Additionally, the EV industry is highly competitive, and the rising cost of raw materials like lithium, nickel, and copper could further squeeze margins. Regulatory risks are another concern for the company in 2023.
On the upside, Mullen Automotive’s stock could benefit from broader macroeconomic factors. After a significant downturn in 2022, there is potential for EV stocks to rebound in 2023. A possible pivot by the Federal Reserve could also be a positive catalyst. With inflation and inflation expectations decreasing, the Fed might pause rate hikes or even cut rates in 2023, which could boost tech stocks.
Technically, the daily chart shows that Mullen’s share price struggled throughout 2022. The stock remains below a crucial level at $0.5171, the low from February 25, and continues to trade below its 50-day and 100-day moving averages. It has also fallen below a descending trendline.
Given these factors, Mullen’s stock is likely to continue declining in 2023, with bankruptcy risks looming. However, if the stock manages to break above the $0.5171 resistance level, it could challenge this bearish outlook.