Mullen Automotive (NASDAQ: MULN) stock price has started the year well even as the EV bubble continues bursting. The shares jumped to a high of $0.48, which was about 30% above the lowest level this year. It has jumped by over 109% from the lowest point in 2022. So, is the MULN stock a good buy in 2023?
MULN stock price has done well this year as retail investors buy the company’s dip. The shares have risen despite a challenging period for EV stocks as the sector comes under intense pressure. Analysts warn that we are in an EV winter that could last for a long time. This explains why most EV stocks like Tesla, Rivian, Nio, and Lucid Motors collapsed.
There have been several negative EV stories recently. For example, Tesla, the most successful EV company in the world, announced a series of price cuts in China as demand continued waning in the country. This means that the country will likely struggle to meet its targets in 2023. It delivered 1.31 million cars in 2022, which was lower than its guidance of 1.5 million. Other EV companies like Nio and Rivian also missed their target.
Another major concern is that the EV industry has moved from undersupply to oversupply. We have seen many companies like Hyundai, General Motors, and Ford all launch their EVs this year. And Chinese companies like Nio and Xpeng are building quality EV cars that have loads of features and long ranges. Therefore, we will likely see an underperformance in the sector.
Elevated interest rates are negative catalysts for EV companies like Mullen Automotive because they make their cars unaffordable. Indeed, recent data from the US shows that demand for cars is cooling. In its most recent report, CarMax, the giant company, warned that sales in its stores were falling.
We believe that investing in Mullen Automotive stock will make you broke. The company has increased its cash burn in the past few months. Further, it will need to raise capital in the next few months to fulfil the large order it received recently. Therefore, a combination of low demand, dilution, and cash burn means that the stock will struggle to recover.
However, shorting Mullen stock will also leave you broke. As a penny stock popular with retail traders, we could see it rise sharply as it has done in the past few days. Therefore, for safety purposes, it is recommended to keep off from the stock.
The four-hour chart shows that the MULN Automotive stock price has done well recently. It managed to move above the important resistance point at $0.30. The shares also moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) moved to the overbought level.
Therefore, I suspect that the stock will resume the bearish trend this week. If this happens, the next key level to watch will be at $0.30. A move above the resistance point at $0.44 will invalidate the bearish view.
This post was last modified on Jan 09, 2023, 04:53 GMT 04:53