ElectraMeccanica Vehicles (NASDAQ:SOLO) may turn out to be a real disrupter in the EV space. It began deliveries of its innovative electric vehicle — a single-seat, three-wheel autocycle — in early October. I presumed SOLO stock would get a bump from the news of its first deliveries, but that didn’t happen.
Investors did, however, seem to get excited when the company announced its strategic manufacturing partner, Zongshen Industrial Group, exercised 1.4 million warrants. SOLO stock popped as much as 15% following the news.
While ElectraMeccanica will need more cash to manufacture its autocycles at scale, investors certainly seemed to view the news as validation of the company’s business plan.
A potentially disruptive product that the company looks prepared to deliver at scale is what may make SOLO stock a viable investment. However, short interest is around 17% and chatter from retail investors suggests there is hope for a short squeeze.
Many traders would love to see SOLO stock climb above the psychologically important $5 mark. Until then, it may struggle to break out of its meme-stock shadow.
Where does this leave investors? I believe the answer to that question will depend on whether there’s a market for the company’s autocycle.
The Real Work Starts Now
ElectraMeccanica Vehicles has a couple of compelling attributes. For starters, its flagship SOLO EV is unique in that it’s designed for one person (hence the name and the company’s ticker symbol). Second, the company met its initial customer deliveries and said it is on track to complete a new production facility next summer with the capacity to make up to 20,000 vehicles a year.
I’ll admit to being skeptical about how well the SOLO autocycle would be received. In March, I wrote: “There is no proven market for the company’s three-wheeled motorcycle/car. If the next words out of your mouth are ‘this time it’s different,’ just be advised that both of us are making assumptions.”
That’s why the vote of confidence from Zongshen is important. It suggests they see an opportunity for the autocycle. But what will that be?
The SOLO EV is an intriguing option as a delivery vehicle. Among ElectraMeccanica’s first buyers are Skechers USA, Cyber Yogurt and a popular Ruby’s Diner franchisee. I also believe the SOLO could be a useful public transportation option. In fact, I like the potential commercial applications far more than I like the autocycle as a replacement for traditional transportation.
ElectraMeccanica has not shared how many reservations it currently has. But the more refundable $250 deposits the company can convert into the full $18,500 price tag, the better it will be for the top line.
The Bottom Line on SOLO Stock
It’s alright to get excited about SOLO stock, but I’d caution investors not to get too excited. An EV company that has successfully met its intial production target is nothing to ignore. However, in the coming months, investors will get a better sense of how well the autocycle is being received.
Until then, SOLO stock appears to be more of a trade than an investment. But if you’re a speculative investor who has some capital to put at risk, a small position may be worthwhile.
The analyst community is bullish on SOLO stock with a low price target of $9.05. That represents upside of nearly 140% from current levels. However, keep in mind that this is a 12-month target. So, if you plan to take a ride with SOLO stock, you’ll likely need to have some patience.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.