I have to admit, it’s been a pleasure to watch Canadian electric vehicle start-up Electrameccanica Vehicles (NASDAQ:SOLO) develop from an under-the-radar company to a serious niche-market contender. It’s also been enjoyable to witness the wild run-up in SOLO stock.
When I was covering Electrameccanica for InvestorPlace last July, many people weren’t taking the company or the stock seriously. Back then, shares were $3 and change.
Today, many more traders have SOLO stock on their watch lists and the investing community isn’t so dismissive of Electrameccanica Vehicles.
So, let’s take a fresh look at the stock with the benefit of hindsight and an open mind as a recent price drawdown may offer an ideal entry point for prospective investors.
A Closer Look at SOLO Stock
Let’s start off with a couple of fast facts. For one thing, SOLO stock has a five-year monthly beta of 2.91. This means that the stock has generally tended to move almost three times as fast, in both directions, as the overall stock market.
Therefore, pouring the entirely of one’s retirement account into this stock isn’t recommended. It’s a highly volatile stock, so moderate position sizing is a must.
Next, we should observe that Electrameccanica has lost, on a trailing 12-month basis, 38 cents per share. I’ll concede that negative earnings aren’t particularly encouraging.
Still, -38 cents per share isn’t drastically negative compared to the share price, which is $5.51. Hopefully, the company will be able to get that number in positive territory in the near future.
Concerning the recent price action of SOLO stock, it has come down quite a bit from February’s peak of around $9.48. Moreover, it has retraced sharply in comparison to November 2020’s 52-week high of $13.60.
Is that a bad thing? Not necessarily, as enterprising investors should be on the lookout for bargains. As a contrarian investor, I’m happy to scoop up shares of a great company after a drawdown.
Good Horsepower for Under $20K
In 2021, many folks are bullish on the electric car market generally.
Investors are, by and large, counting on the new U.S. presidential administration to incentivize the purchases and sales of clean-energy vehicles.
That’s a reasonable bet to make, but let’s be frank. Electric vehicles aren’t always affordable. And in the era of the Covid-19 pandemic and high unemployment rates, cost is a major factor in people’s automotive buying decisions.
Motor Trend‘s Christian Seabaugh gave the Solo a thorough review and pointed out the motor’s 82 horsepower and “128 lb-ft of torque.” I must say, that’s pretty good power for a little one-seat vehicle.
West Coast Invasion
Electrameccanica is a Canadian company. However, it’s ambitiously broadening its presence in one particular region of the United States.
In January company announced that it’s expanding its retail network to three new locations in the west coast of the U.S. Specifically, two locations were set to open in California and another one in Arizona.
Then, in February, Electrameccanica announced the expansion of its retail footprint into seven additional locations along the U.S. west coast.
Those seven new locations will include “traditional, high-end malls and town centers” in California, Colorado and other states.
Will the American west coast embrace these three-wheeled vehicles? Only time will tell, but there could be a wide-open market for affordable and efficient electric cars.
And don’t forget that the Electrameccanica Solo features a 100-mile range and a top speed of 80 miles per hour. That’s an important selling point as it means that the Solo cars are safe for highways.
So, perhaps roadway and highway drivers along the West Coast will appreciate the surprisingly powerful Electrameccanica Solo.
The Bottom Line
The share-price pullback of SOLO stock shouldn’t deter prospective investors from taking a long position.
If anything, it’s a window of opportunity as Electrameccanica offers low-cost electric cars that could become popular in America soon.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.