Luxembourg-based electric vehicle (EV) manufacturer Arrival (NASDAQ:ARVL) unquestionably wants to sell cars in the U.S. The company has big dreams and some major investors, but does this make ARVL stock a good buy? Not necessarily, as a deep dive into Arrival’s financials should dissuade cautious investors from taking a share position.
Don’t get me wrong. It’s fine to make short-term trades with Arrival shares. Meme-stock traders might target Arrival for a short squeeze, so it could be fun to hold a few shares and treat them as lottery tickets.
Serious, long-term investors, on the other hand, should exercise caution. When you hear the words “going concern,” it’s definitely time to question Arrival’s grand plans and consider keeping your own capital out of harm’s way.
What’s Happening With ARVL Stock?
Once worth more than $30 apiece, shares of ARVL stock now cost less than 50 cents. Sadly, Arrival has provided a harsh lesson in what can happen when overeager traders buy during a hype phase.
Furthermore, this situation is alarming because the Nasdaq has sometimes been known to delist stocks that trade below $1 for too long. It’s conceivable, then, that Arrival might get booted off the Nasdaq exchange someday.
That hasn’t occurred as of late January 2023, and again, a short squeeze might save the day for Arrival’s shareholders. That’s not a guarantee, however.
It’s also worth noting that some big-money firms, including BlackRock (NYSE:BLK) and Millennium Management, recently held large positions in ARVL stock. Does this mean you should enter into the trade, as well?
Arrival Might Not Have Enough Capital to Fund Its Operations
Large-scale investors might come to regret taking a long position in Arrival. In a business update, the company included a section titled “Going Concern.” That phrase typically doesn’t inspire confidence in prospective shareholders.
Arrival has big dreams of delivering its first vehicles to U.K. customers, while also making a foray into the U.S. EV market. “Our talented team in both the US and Europe supporting the US product development gives us confidence in our ability to execute,” Arrival declared in a business update call document.
As you’re surely aware, the U.K. and U.S. EV markets have become increasingly crowded and competitive in the 2020s. However, that’s not Arrival’s only obstacle to achieving its grand, multi-national plans. Get a load of this gut-kicker of a statement:
“As of September 30, 2022, the Company had existing cash and cash equivalents of approximately $330 million. This balance is not sufficient to cover twelve months of operations.”
Just that excerpt alone should be a dealbreaker for cautious investors. Granted, Arrival plans to restructure its business and apparently “is exploring all funding and strategic opportunities to obtain this necessary funding.” Still, whether that funding will actually materialize remains to be seen.
So, Is ARVL Stock a Good Buy?
Arrival’s bold vision isn’t a replacement for the necessary funding the company needs to pursue that vision. Big talk is common among today’s EV companies, and Arrival might not succeed in the U.K. or the U.S.
ARVL stock isn’t a good buy and, I’m sorry to say it, but the stock could someday get kicked off of the Nasdaq exchange. Therefore, investors should seek returns elsewhere, as there are plenty of other tradable EV industry businesses to choose from.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.