Mullen (MULN) Stock Falls Despite Preorder Surge

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On the surface, emerging electric vehicle (EV) manufacturer Mullen (NASDAQ:MULN) fired on all cylinders, metaphorically speaking. Recently launching a promotional tour to bolster interest in the upcoming Mullen FIVE, the underlying company reported better-than-expected pre-order volume. While MULN stock gained substantially since Oct. 18, it plunged more than 8% on Friday afternoon.

At first glance, investors would be forgiven for assuming that Mullen’s latest series of positive news would help MULN stock. For instance, regarding the promotional tour, management decided to expand its event — which started in Pasadena, California — with additional stops now scheduled for Nov. 1 and Nov. 2 in Anaheim, a city just outside Los Angeles.

Billed as the “Strikingly Different” tour, the product showpiece will allow potential customers to experience the FIVE firsthand. Part of the event includes a ride along with a professional driver, facilitating interaction with an innovative infotainment system.

Even better, Mullen’s press release revealed that the “overall magnitude of Mullen FIVE pre-orders, leading up to and during the Pasadena event has quadrupled in volume.” Interest in the new EV prompted management to expand its tour.

“The incredible response we are receiving for the Mullen FIVE on tour is a repeat of what we witnessed last November at the FIVE’s LA Auto Show world debut —confirming very high interest in this EV! It is very gratifying to see the FIVE reservations pour in and the tour slots fill up in a matter of minutes,” said David Michery, CEO and chairman of Mullen Automotive.

Macro Headwinds Hurt MULN Stock

The good news carried over onto the other side of the Atlantic, which in theory should bolster MULN stock. As InvestorPlace contributor Larry Ramer pointed out, Mullen announced earlier this week that it would distribute an urban delivery EV in Europe. Billed as the I-GO to address the last-mile dilemma, the company intends to sell the EV in Germany in December. Nevertheless, concerns obviously remain for investors.

Primarily, all the encouraging developments at Mullen can’t shelter MULN stock from macroeconomic headwinds. With the Federal Reserve committed to shrinking its balance sheet following bond buybacks during the early stage of the Covid-19 pandemic, the resultant environment of borrowing costs hurt consumer demand.

“Higher prices and higher interest rates are slowing sales in the used market,” Cox Automotive Senior Economist Charles Chesbrough said. While discussing the secondhand auto market, the fundamental headwind will likely affect other high-ticket items, such as EVs and housing.

As well, questions remain about consumers willing to fork over big dollars for a largely unknown enterprise. According to data analytics firm Escalent: “Established automotive brands have currency with consumers, who have recognized the strides those brands have taken to improve and refine their electric offerings.”

Even back in 2011, consumer research indicated that brand loyalty matters to EV buyers. As an emerging specialist with no prior automotive track record, Mullen will likely face hurdles in the future. Thus, many investors may have decided to either pocket their profits or cut losses with MULN stock.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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