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Why ElectraMeccanica Vehicles Stock Just Popped 10%

By Rich Smith - Dec 17, 2020 at 12:45PM

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One optimistic analyst predicts 25% sales growth for 10 straight years.

What happened

Shares of three-wheeled, electric passenger car maker ElectraMeccanica Vehicles ( SOLO -1.66% ) are up 10.7% as of 11:45 a.m. EST Thursday -- and you if you own the stock, you can thank the friendly analysts at Stifel Nicolaus for your gains.

Following hard on the heels of financial advisor Colliers' initiation at buy yesterday morning, Stifel weighed in with a buy initiation of its own right after the closing bell Wednesday.

Man on a scooter put-putting up a rising stock arrow

Image source: Getty Images.

So what

In its note, covered on, Stifel predicted that ElectraMeccanica will grow its sales 25% annually over the next decade as the company carves out "a defensible niche in the underserved commuter EV market."

It's hard to argue with the thesis. If you look around, there aren't really a whole lot of other companies making cars with just three wheels. And with consumer sentiment leaning toward electric vehicles in general, bolstered by "tightening global emissions regulations" from the government and "continued innovation in battery technology, and continued investment in electrification infrastructure" from private corporations, Stifel thinks that ElectraMeccanica will be able to claim a market niche among commuters seeking affordable vehicles, and perhaps fleet operators offering on-demand transportation, adds

Now what

Will this translate into profits for investors, though? That's the trickier question to answer.

Presently, ElectraMeccanica isn't a profitable operation, losing more than $28 million and burning through more than $16 million in cash over the last year while producing less than $600,000 in revenue, according to S&P Global Market Intelligence data. Most analysts who track the stock don't anticipate ElectraMeccanica producing any appreciable profits at all before 2024 at the earliest.

If you want to make money on this one, you may just have to do what Stifel is doing, and hope things improve by 2030.

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.

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