Chronicle Journal: Finance

Arcimoto vs. ElectraMeccanica: Which Electric Vehicle Stocks is a Better Buy?

With the electric vehicle industry poised to become one of the fastest growing segments in the world, many newly emerging companies such as Arcimoto (FUV) and ElectraMeccanica Vehicles (SOLO) are getting ready to capitalize on this trend. But will these companies live up to the market expectations or end up as poor speculative investments? Read more to find out.

Arcimoto, Inc. (FUV) and ElectraMeccanica Vehicles Corp (SOLO) are two newly emerging companies in the electric vehicle space. However, both companies have managed to amass popularity with their uniquely designed cost efficient EVs. While FUV manufactures three-wheeled “fun utility vehicles,” SOLO’s primary product is a one-seater EV designed for cost efficient urban commuting.

Both FUV and SOLO are currently in the developmental stage, and hence are priced significantly lower than the industry peers. Both the companies have the potential to grow significantly over the upcoming years, given the shifting preference for EVs and government backing. Hence, investors going long on these stocks now should reap manifold returns in the future.

Both companies have generated significant returns over the past year. FUV has gained 768.5% over this period, while SOLO returned 363.2%. However, in terms of past six-month performance, SOLO is the clear winner with a 710.6% gain, versus FUV’s 531.3% return.

But which stock is a better buy now? Let’s find out.

Latest Developments

SOLO began commercial production of its flagship three-wheeled SOLO EV for single riders in August this year. The company is also planning to launch a utility and fleet version of SOLO EV, which is expected to be available by early 2021.

SOLO selected Arizona and Tennessee as two sites for SOLO EV US assembly facility and engineering technical center. This allows the company direct access to the United States EV market without any trade barriers such as tariff expenses, ensuring higher returns for shareholders.

On October 29th, SOLO announced the opening of six retail showrooms across the country within November. This adds to the four showrooms already operating in the country. The first batch of SOLO EVs were presented in the Los Angeles Ride and Drive press event. The vehicles are expected to be available for commercial sale by next year.

Like SOLO, FUV also began the production of its latest product, recreational motorcycle Arcimoto Roadster on November 16th.

FUV partnered with DHL in the third quarter to facilitate home delivery of Arcimoto vehicles across the country, boosting the company’s direct-to-customer sales channel. It also launched high visibility pilot programs for Arcimoto vehicles.

Earlier this year, FUV raised $10 million through a common stock offering of 1.37 million shares, which should fund the company’s production and working capital related expenses, thereby accelerating its supply capacity. On November 20th, FUV announced another public offering of 1.13 million shares to raise approximately $15 million. The gross proceeds from the equity offering is expected to accelerate the production of proprietary vehicles, thereby increasing the working capital turnover.

The company partnered with the city of Orlando to test FUV vehicles across six departments, and upon successful verification, these would be deployed across the city as a part of its clean energy drive.

Recent Financial Results

SOLO’s revenue increased 50% year-over-year to C$0.30 million in the third quarter that ended September 2020. Cash and cash equivalents improved 810.8% over the last two quarters to $101.10 million.

FUV’s total revenue increased 1,953.1% year-over-year to $683,895 in the third quarter that ended September 2020. The company produced 31 vehicles in the month of September. EPS improved 31.8% from the same period last year.

Past and Expected Financial Performance

FUV’s revenue and EBITDA increased 5,169.3% and 9.5% year-over-year, respectively. SOLO’s revenue and EBITDA, on the other hand, rose 28.5% and 30.3%, respectively, over the same period. FUV’s total assets increased at a CAGR of 193.2% over the past three years, while SOLO’s total assets grew at a CAGR of 19.1% over the same period.

Analysts expect FUV’s EPS to rise 35.3% in the current year, and 18.2% next year. The company’s revenue is expected to grow 222.9% in the current year, and 575.5% next year.

On the other hand, analysts expect SOLO’s EPS to rise 18.3% in the current year, and 6.1% next year. The company’s revenue is expected to grow 13.4% in the current year, and 2,540.3% next year.

Valuation

In terms of trailing 12-month Price/Sales, SOLO is currently trading at 688.84x, 78.8% higher than FUV, which is currently trading at 146.31x. SOLO is also more expensive in terms of trailing 12-month EV/Sales (1002.11x versus 176.21x).

However, FUV’s trailing 12-month Price-to-Book ratio of 18.24x is 55.5% more expensive than SOLO’s 8.11x.

POWR Ratings

FUV is rated a “Buy” in our proprietary POWR Ratings system, while SOLO is rated “Neutral”. Here’s how the four components of the POWR Ratings are graded for both these stocks:

FUV has an “A” for Trade Grade and Industry Rank, and a “C” for Buy & Hold Grade and Peer Grade. It is currently ranked #19 out of 34 stocks in the Auto & Vehicle Manufacturers industry.

SOLO has an “A” for Trade Grade and Industry Rank, and a “D” for Buy & Hold Grade and Peer Grade. It is currently ranked #26 in the same industry.

The Winner

FUV has already launched several models of its three-wheeled EVs in the market, tailor made for different purposes, while SOLO is yet to commercially sell its proprietary one-seater EVs. FUV’s financials, and revenue and earnings outlook are better than SOLO, making it a better buy here.

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FUV shares were trading at $14.48 per share on Wednesday afternoon, up $0.15 (+1.05%). Year-to-date, FUV has gained 799.38%, versus a 14.16% rise in the benchmark S&P 500 index during the same period.



About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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