Is it safe to buy Mullen Automotive?

Mullen Automotive (NASDAQ: MULN) stock price has been in the spotlight recently. The shares surged to a high of $0.40, which was the highest level since November 2. At its peak this week, MULN shares were about 129% above the lowest level this year.

Is Mullen Automotive a good buy?

Mullen Automotive is one of the several companies that are aiming to become a major player in the electric vehicle industry. The firm is building several vehicles including Mullen Commercial and Mullen Five. Five is an electric SUV crossover that has an estimated range of 325 miles. Mullen Commercial is a company used mostly for deliveries.

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MULN stock price surged this month after the company announced a new major order from Randy Marion Automotive Group (RMA). The firm will buy 6000 vehicles in a deal valued at more than $200 million.

Mullen Automotive has also spent millions on several acquisitions this year. It recently acquired Electric Last Miles Systems (ELMS) for $240 million. It also spent $148.2 million for a controlling stake in Bollinger Motors, a bankrupt company.

MULN share price also surged after the company partnered with Loop, a company that provides charging solutions. The two firms will partner to finance, own, and operate EV charging infrastructure. Loop will offer $300 million in financing. 

Still, Mullen Automotive faces significant risks going forward. For one, like Tesla and Rivian, it needs a mountain of cash to scale production. The most recent results showed that the company had just $61 million in cash. Therefore, it will need to boost its balance sheet, which will lead to more cash burn,

The company has proposed a 1-to-25 reverse stock split and asked shareholders to facilitate the issuance of $150 million in convertible notes and $190 million in preferred stock.

Further, the company faces significant competition from established EV brands like Tesla, Lucid, Rivian, and Ford.

MULN stock price forecast

Is it safe to buy Mullen shares? The daily chart shows that the Mullen Automotive share price has been in a strong bearish trend in the past few months. This decline saw it crash to a low of $0.1781, which was the lowest level on December 8. It has moved below the 25-day and 50-day moving averages. It also moved below the important resistance level at $0.5208, which was the lowest level on February 23rd. 

Therefore, the MULN share price will likely continue falling as sellers target the next key support level at $0.15. However, like other meme stocks, there is a likelihood that Mullen could have significant volatility in the coming days.