Why Electrameccanica Vehicles Stock Fell 23.8% in March


What happened

Shares of Electrameccanica Vehicles (NASDAQ:SOLO) dipped 23.8% in March, according to data from S&P Global Market Intelligence. The stock lost ground amid a steep pullback that rocked valuations for companies in the electric vehicle (EV) space. 

SOLO Chart

SOLO data by YCharts.

Many growth-dependent companies suffered substantial sell-offs in March as investors weighed rising Treasury bond yields, uncertain Federal Reserve monetary policy, and momentum for value and cyclical stocks. The EV space was particularly hard hit, and Electrameccanica was swept up the pullback. The Canada-based EV company also published its fourth-quarter results last month, and the release corresponded with a substantial decline for its share price. 

An Electrameccanica SOLO vehicle in a factory

Image source: Electrameccanica.

So what

Electrameccanica published a press release on March 16 announcing that it had selected Mesa, Arizona, as the site for its U.S. base of operations. The facility will feature a light vehicle assembly plant and an engineering center. The company says that the new facility will help it meet demand for its single-occupant SOLO electric vehicle.

The EV specialist followed up the Arizona facility announcement with its fourth-quarter results a week later, reporting that it had recorded $224,000 in revenue and a net loss of $41.1 million in the period. The company ended the fiscal year with cash and short-term equivalents totaling $129.5 million, up from $8.6 million in the prior-year period. 

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Now what

Electrameccanica’s stock has regained some ground early in April. The company’s share price rose roughly 5% in the month’s first trading day. 

SOLO Chart

SOLO data by YCharts.

While the stock saw a substantial slump last month, it looks like the company is making progress on moving forward with its manufacturing initiatives. Electrameccanica expects its new Arizona facility will create up to 500 new jobs and that it will be capable of producing 20,000 SOLO vehicles per year when at full operational capacity. The EV market has huge room for expansion over the long term, but investors have to keep in mind that the company is at an early growth stage — and its outlook is speculative. 

Electrameccanica has a market capitalization of roughly $567 million and is valued at approximately 95 times this year’s expected sales.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/04/02/why-electrameccanica-vehicles-stock-fell-238-in-ma/

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