A rising tide lifts all boats. Even those that should be sinking, like Electrameccanica’s (NASDAQ:SOLO) SOLO stock.
That’s going to be true with the electric vehicle boom. Anyone who can sell an electric, or will sell an electric, or who will support an electric, can sell stock in the current market.
The stock market won’t shake this out. It’s the market market’s job to do it.
So, let’s meet Electrameccania, a Canadian outfit which came public in 2018. It’s a spin-off from a sports car company called Intermeccanica, launched by Canadians Jerry Kroll and Henry Reisner.
The Proposition
While other electric car companies are coming public to change the world or build the manufacturing base, Electrameccanica is an importer. Its aim is to bring in 75,000 three-legged, one-seat electrics made by Zongshen Industrial Group of Chonqing, China. Built on a motorcycle platform, but with two wheels in front, it can get about 100 miles on a charge and costs just $18,500. Production began over the summer.
Since then, only reviewers have gotten their hands on them, and that only briefly. They report that the car can get to 80 mph on a freeway. The battery can be recharged overnight on a standard wall plug, and in 2 ½ hours using the power plug of a clothes washer. The biggest problem? It’s a bit loud at low speeds.
The original pitch was for solo commuting, but the company now talks up things like pizza and prescription delivery. The new pitch includes plans to build a factory near Nashville, Tennessee, and to quickly build a dealer network.
Shares went nowhere until the electric car stock boom got rolling in November. Suddenly shares that sold for $3 late in October were selling for $10. They have since bounced down to $6 and opened Feb. 3 at $8.15. At that price you’re looking at a market cap of $600 million.
Revenues came in at $560 million during 2019, then $245 million for the September quarter, with $233 million expected for December when it reports in April. The money now is coming from production of custom-built roadsters.
The problem is you’re not talking here about a car maker, but a car dealer. The company expects to have 13 dealerships soon, up from 10, all on the West Coast. That press release about the dealers seems to have renewed interest in the stock.
The Skepticism
Electrameccanica’s prospects intrigue Wall Street, with four analysts all saying buy it, and an average price target of $9 per share.
That’s not the case among InvestorPlace writers. Matt McCall says that if you got it on the run-up it’s time to sell. He notes the car is street legal in the U.S. only because it’s classed as a motorcycle, meaning drivers must wear a helmet on the road.
Faizan Farooque calls SOLO stock overvalued. He notes that the company has been kept afloat by stock sales, doubling the float from its 2018 IPO. While the vehicle is novel, he says Americans prefer large pick-ups.
The Bottom Line on SOLO Stock
The Trump trade war seems to have delayed the SOLO’s debut and clouded its prospects.
I also think the marketing is wrong. Rather than sell this as a way for white-collar workers to reach a non-existent office, it makes some sense as an intra-city delivery vehicle. Ghost kitchens and pharmacy chains should be snapping these up, not auto dealers.
This means that while Electrameccanica may have a shot at success, it’s throwing that shot away. Get me one big order from, say, Uber (NASDAQ:UBER) or Walgreens Boots Alliance (NYSE:WBA) and I’ll become bullish.
Absent that, a hard no.
At the time of publication, Dana Blankenhorn owned no shares (directly or indirectly) in any companies mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.
