Is Now the Right Time to Invest in EV Manufacturer Electrameccanica?

Electrameccanica Vehicles’ (SOLO) stock is soaring along with many EV stocks. It plans to introduce an interesting product - a single-seat EV which could be popular in urban areas. Let’s find out if it is the right time to invest in SOLO with its latest developments.

Electrameccanica Vehicles Corp. (SOLO) is a designer and manufacturer of environmentally efficient electric vehicles, operating in two segments — Electric Vehicles and Custom Build Vehicles. The company’s flagship product includes a purpose-built, single-seat three-wheeled Electric Vehicle called the SOLO, designed exclusively for urban commuters.

Global EV sales are reaching new highs every year. Changing consumer attitudes, improved battery economics, broader access to charging, and stricter regulatory policies all present growth opportunities for SOLO’s flagship product. It plans to expand its retail footprint globally, opening up key markets in Europe and Southeast Asia, along with the United States.

The company’s “Drive Solo” marketing campaign for an innovative, three-wheeled, single-occupant all-electric vehicle could transform urban transportation, as the world is moving towards eco-friendly vehicles. SOLO’s innovative developments and marketing strategies have helped the stock gain 221.4% year-to-date. This impressive performance and potential upside based on several other factors have helped SOLO earn a “Strong Buy” rating in our proprietary rating system.

Here’s how our proprietary POWR Ratings system evaluates SOLO:

Trade Grade: A

SOLO is currently trading above its 50-day and 200-day moving averages of $3.10 and $2.27, respectively, indicating that the stock is in an uptrend. The stock gained 143.31% over the past three months, reflecting a solid short-term bullishness.

SOLO’s revenue increased 63.6% year-over-year to $0.25 million in the third quarter ended September 2020. The increase in revenue was primarily attributable to an increase in custom-built roadsters that were produced by the company. Cash and cash equivalents increased 522.8% from the year-ago quarter to $77.3 million in the third quarter.

On October 29th, SOLO announced that it will expand its retail footprint by opening six new retail locations across the western US within the next month. It also announced that the initial shipment of its production vehicles for its flagship SOLO electric vehicles have arrived in the United States. This vehicle rollout strategy will allow the company to meet increasing demand.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, SOLO is pretty well-positioned. The stock is currently trading just 1% below its 52-week high of $9.74, which it hit on November 19th. SOLO’s competitively priced innovative and environmentally friendly developments in a burgeoning EV market has allowed it to grow substantially.

Peer Grade: C

SOLO is currently ranked #23 out of 33 stocks in the Auto & Vehicle Manufacturers industry. Other popular stocks in this industry are Toyota Motor Corporation (TM), Tesla, Inc. (TSLA), and Penske Automotive Group (PAG).

While TSLA beat SOLO by gaining 481.7% year-to-date, TM and PAG returned 0.9% and 15.6%, respectively, over this period. 

Industry Rank: A

The Auto & Vehicle Manufacturers industry is ranked #22 out of the 123 industries. Although the outbreak of the coronavirus pandemic lowered the purchase of vehicles, its demand is expected to rise again as the United States enters the recovery phase.

The rollout of new and improved EVs and plug-in hybrid models in 2021 should accelerate the growth of the electric vehicle industry that has been witnessing a continuous surge in demand as more people are looking to buy individual commutes to avoid public transport.

Overall POWR Rating: A (Strong Buy)

SOLO is rated “Strong Buy” due to its impressive financials, short-and-long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

SOLO’s recent showcase of its three-wheeled vehicles has helped it attract investor attention. As the company rolls out its vehicles for commercial sale over the upcoming months, the stock is expected to skyrocket, allowing investors to generate substantial capital gains. With an increasing global demand for eco-friendly vehicles, the company can witness further growth based on its earnings and revenue outlook, and favorable analyst sentiment.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for SOLO. It has an average broker rating of 1, indicating favorable analyst sentiment. Two out of two Wall Street analysts have rated it a “Strong Buy”. The consensus EPS estimate for the current year indicates an 18.3% improvement year-over-year. The consensus revenue estimate of $570 thousand indicates a 4.3% increase from the same period last year. 

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SOLO shares were trading at $11.79 per share on Friday morning, up $2.15 (+22.30%). Year-to-date, SOLO has gained 448.37%, versus a 12.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.


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