With a $198.71 million market cap, Mullen Automotive, Inc. (MULN) is an electric vehicle (EV) manufacturer and distributor. The company owns and runs businesses such as CarHub, which uses AI to give a user-friendly way to buy, sell, and own a car, and Mullen Energy, which sells battery technology and emergency point-of-care solutions.
While MULN is yet to report any revenue, its efforts to keep itself capitalized have seen its weighted average shares outstanding jump from 17.47 million as of December 31, 2021, to 1.36 billion as of December 31, 2022.
Unsurprisingly, MULN’s stock has crashed 55.9% over the past month and 73.7% over the past six months to close the last trading session at $0.09, significantly below its 50-day and 200-day moving averages of $0.26 and $0.50, respectively.
Let's take a closer look at MULN’s fundamentals.
Unfavorable Recent Developments
MULN has lately been mired in legal and regulatory distractions.
Yesterday, MULN announced that it had filed a civil complaint for defamation in the Superior Court of Delaware, alleging that on March 22, 2023, dot.LA published an article on its website authored by David Shultz that contained false and defamatory statements regarding Mullen, including false and defamatory statements regarding the terms of a settlement agreement of a civil action.
McDermott Will & Emery LLP, a leading international law firm, has been retained to represent the company in the lawsuit.
On March 8, MULN announced that it had received a 180-day extension from Nasdaq to meet the $1 minimum bid price requirement. According to the September 7, 2022, notice provided by Nasdaq, the company had until March 6, 2023, to fulfill the requirement and regain compliance.
With the deadline now extended to September 5, 2023, MULN has announced that it would implement a reverse stock split to cure the deficiency if the stock fails to trade above $1 for a minimum of 10 consecutive business days prior to the due date.
Weak Financials
While MULN’s top line remained muted during the fiscal first quarter (ended December 31, 2022), its loss from operations widened 423.7% year-over-year to $73.62 million. During the same period, its net loss attributable to common shareholders worsened by 141.5% year-over-year to $376.92 million.
However, as a result of the dilution of the capital structure due to the rampant issue of fresh equity shares, MULN has been able to demonstrate a cosmetic narrowing of its net loss per share to $0.28, compared to $8.93 during the previous-year quarter.
Poor Profitability and Inefficient Asset Utilization
MULN’s trailing 12-month return on total capital (ROTC) of negative 144.39% is strikingly lower than the industry average of 6.32%. Likewise, the company’s trailing 12-month return on total assets (ROTA) of negative 217.65% compares unfavorably to the industry average of 3.84%.
POWR Ratings Reflects Unpalatability
MULN has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. MULN also has an F grade for Value and Stability, as reflected in its 24-month beta of 2.91 and the vast spread between its 52-week high and 52-week low prices of $3.45 and $0.09, respectively.
MULN has a D grade for Quality and Sentiment, consistent with its poor profitability and bleak outlook. It is ranked #57 of 64 stocks in the Auto & Vehicle Manufacturers industry.
Beyond what has been discussed above, additional ratings for Growth and Momentum can be found here.
Bottom Line
MULN’s operations seem to be growing with Rapid Response Defense Systems partnering with the company as the exclusive provider for Class 1 EV Cargo Vans for the U.S. government, Randy Marion Isuzu, LLC awarding a purchase order of $200 million for 6,000 Class 1 EV Cargo Vans, and the recent introduction of two new commercial EVs.
However, in view of its stake dilution, weak fundamentals, deteriorating bottom line, plummeting stock price, and a tough macroeconomic environment that has been testing even the most well-capitalized businesses, investors are advised to avoid bottom fishing for the stock, at least until it secures its future as a listed entity at Nasdaq.
Stocks to Consider Instead of Mullen Automotive, Inc. (MULN)
Unfortunately, the odds of Mullen outperforming in the weeks and months ahead are greatly compromised. However, there are many Automotive stocks with impressive POWR Ratings. So, consider these three A-rated (Strong Buy) Auto & Vehicle Manufacturers stocks instead:
Mercedes-Benz Group AG (MBGAF)
Stellantis N.V. (STLA)
Honda Motor Co., Ltd. (HMC)
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MULN shares were trading at $0.10 per share on Wednesday afternoon, up $0.01 (+11.23%). Year-to-date, MULN has declined -65.03%, versus a 4.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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