Skip to main content

Should You Go Along For the Ride With ElectraMeccanica Vehicles?

Wednesday, March 24, 2021 | Chris Markoch
Should You Go Along For the Ride With ElectraMeccanica Vehicles?

ElectraMeccanica Vehicles (NASDAQ:SOLO) stock price is continuing its year-long descent after it released its fourth-quarter earnings report. In early morning trading, SOLO stock is down over 5%. For the year, ElectraMeccanica stock has lost over 25%.

Some of this is because the electric vehicle (EV) bubble is starting to deflate. 2020 was the year that brought many companies public, many by way of a special purpose acquisition company (SPAC). This has led to a certain fatigue among retail investors. And for institutional investors there are only so many companies that they want to place a bet on. With only about 5% institutional ownership, the big banks and hedge funds are looking elsewhere.

The Electric Vehicle Space is Getting Crowded

 For most of 2020 being different was a benefit to ElectraMeccanica Vehicles. The company’s autocycle, the Solo, was offering something truly differentiated. I use the word autocycle intentionally. The Solo is a three-wheeled vehicle. In some states it’s classified as a car. In others, it’s classified as a motorcycle. And still others have created this hybrid definition, the autocycle, to describe the product.

What seems to be universal is that to drive one does not require anything more than a standard driver’s license. However, the price tag of $18,500 may be inexpensive for a car, but it’s hefty for a motorcycle, especially one that will limit the size of the biker.

What is the Company’s Addressable Market?

When I look at a picture of a Solo autocycle, I immediately think that I could never be comfortable in it. It turns out I’m right. The car is not designed for individuals taller than 6 feet and for those who weigh more than 200 pounds. I don’t qualify on either of those metrics.

That limits the addressable market substantially. But that’s only if the company continues to market this as a commuter’s dream car. That argument seemed to get a lift during the pandemic when optimistic traders began imagining that many commuters would embrace the idea of a car that redefined personal space and social distancing.

But in looking at ElectraMeccanica for the last year, I’ve felt the company is miscasting itself as a commuter’s dream. I think the long-term appeal of the Solo is as a last-mile delivery vehicle. And sure enough the company does have plans in the works for modified versions of the Solo with slightly more cargo room.

This wouldn’t be something that would take the place of FedEx (NYSE:FDX) or UPS (NYSE:UPS) or even Amazon (NASDAQ:AMZN). However, it could be something that Uber (NYSE:UBER) partners with or even a chain like Kroger (NYSE:KR). And if that were the case, institutional investors may get more excited.

Earnings Were Mixed

The company reported revenue of $224,000 for the quarter which was lower than the $238,000 it earned in the same quarter in 2019. For the full year, revenue came in at $59,000 which was less than the $586,000 the company generated in 2019.

On the earnings front, the news was the same. For the quarter, the company’s earnings adjusted for non-recurring items came in at a negative 19 cents per share. This was lower than the consensus estimate of negative 11 cents per share. And it was slightly more than the loss of 17 cents per share in the same quarter in 2019.

ElectraMeccanica has managed to beat revenue estimates in three of the past four quarters, but it has missed on earnings estimates for all four quarters. Since the company is not yet profitable, investors may be willing to overlook this. However, the company will have to start showing revenue.

It’s All About the Production

The bullish case for SOLO stock centers on the company’s build out of production facilities in the United States. After an extensive search the company recently announced the facility will be built in Mesa, Arizona.

When operational, the plant is expected to produce up to 20,000 vehicles per year. And ElectraMeccanica does have an order book of over 23,000 preorders with a refundable deposit of $250.

However as the company’s earnings report showed, production can’t begin too soon.  The company managed to raise cash through a secondary offering. Investors may remain patient while ElectraMeccanica gets its production facility built. But that’s not a sustainable long-term strategy

Featured Article: Fundamental Analysis and Choosing Stocks


7 Bellwether Stocks Signaling a Return to Normal

Bellwether stocks are considered to be leading indicators about the direction of the overall economy, a specific sector, or the broader market. They are predictive stocks in that investors can use the company’s earnings reports to gauge economic strength or weakness.

The traditional definition of bellwether stocks brings to mind established, blue-chip companies. They are the home of mature brands with consumer loyalty. These may be stocks that aren’t associated with exceptional growth; some may be dividend stocks.

But there’s something different about normal this time around. If it’s true (and I think it is) that the old rules no longer apply, investors need to change the way they think about bellwether stocks. Plus, let’s face it, many stocks that we might consider to be bellwether stocks have already had a bit of a vaccine rally. That means that the easy gains are gone.

With that in mind, we’ve put together this special presentation that highlights seven of what may be termed the new bellwether stocks. These are stocks that investors should be paying attention to as the economy continues to reopen.

One quality of many of these stocks is that they are either negative for 2021 or underperforming the broader market. And that means that they are likely to have a strong upside as the economy grows.

View the "7 Bellwether Stocks Signaling a Return to Normal".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Electrameccanica Vehicles (SOLO)1.3$3.31flatN/A-5.81Buy$9.42
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.