Arcimoto Inc: Wall Street Sees Big Upside for This Beaten-Down EV Stock

Arcimoto Inc: Wall Street Sees Big Upside for This Beaten-Down EV Stock

Why Arcimoto Stock Is Attractive, Despite a Tough Year

Over the last few years, tech stocks have been some of the biggest winners, with investors taking advantage of artificially low interest rates to send growth stocks higher in price. But with bond yields rising, investors are taking a closer look at tech stocks to determine if their valuations are too high.

It seems like a bit of a contradiction: rising bond yields are indicative of a stronger economy, which you’d think would be good for stocks. Unfortunately, a stronger economy coupled with higher interest rates can hurt tech stocks whose share prices have been boosted based on future profits.

Higher interest rates mean future earnings are worth less today. The further down the road profitability is, the less valuable a company becomes in the present. And with interest rates rising, there’s less reason for investors to pour their money into risky assets like stocks.

Both value and growth stocks take a hit from higher bond yields, but they put a bigger dent in growth valuations.

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That’s why tech stocks have been taking a breather over the last little while. This last happened in 2013, years after the 2008/2009 financial crisis, when the Federal Reserve began to gradually phase out its generous bond-buying program.

But as history shows, tech stocks always come roaring back. That’s because innovative tech companies will continue to juice the economy.

If anything, investors should look at the recent sell-off as an opportunity to pad their portfolios with undervalued tech stocks.

One tech stock that recently got an upgrade from Wall Street is Arcimoto Inc (NASDAQ:FUV), an often-overlooked electric vehicle (EV) stock. Frankly, it’s mostly overlooked because investors get the wind knocked out of them from the ongoing, incessant banter of Elon Musk and the enthusiasm for Tesla Inc (NASDAQ:TSLA).

In 2020, Arcimoto Inc took full advantage of the coronavirus-fueled economic recovery, with FUV stock soaring by roughly 705% that year. The momentum carried into 2021, with Arcimoto stock rallying by another 173%, hitting a record-intra-day high of $36.80 in early February.

But then there was a market-wide stock sell-off, which was fueled by fears of rising bond yields. That dragged FUV stock lower. Since then, Arcimoto stock has bounced around, but it has recently found support near $11.30 per share.

As of this writing, FUV stock is up by 72% year-over-year, but it’s down 14% year-to-date.

Despite its stock being in the red in 2021, Arcimoto Inc’s outlook is solid—or at least Wall Street thinks so. Of the analysts providing a 12-month share-price forecast for Arcimoto stock, their median target is $13.50, with a high target of $19.00. This suggests upside potential of 19% and 68%, respectively.

That’s still well below the company’s February 2021 high. To get there, FUV stock needs to climb by an additional 94%. That might take some time.

There are other issues outside of bond yields that have been hurting EV stocks, including the global pandemic, a shortage of semiconductors, and a broken global supply chain.

But those factors are hurting most sectors, not just tech stocks. Eventually, the pendulum will swing back. Investors just have to prepare for that.

Despite several disruptions, Arcimoto Inc recently reported its best quarter to date, and its balance sheet is the best it has been in the company’s history.

Chart courtesy of StockCharts.com

FUV Stock Overview

Arcimoto designs, develops, manufactures, and sells ultra-efficient electric vehicles. Whereas most EV companies focus on traditional four-wheel vehicles, Arcimoto is cornering the three-wheeler market and taking on the electric car. (Source: “Q2 2021 Report,” Arcimoto Inc, August 16, 2021.)

The company’s flagship product is its “Fun Utility Vehicle” (FUV), which is a two-seat urban vehicle. Production began in September 2019.

In November 2020, Arcimoto Inc began developing its “Roadster,” a three-wheel vehicle aimed at the recreational motorcycle segment.

The “Rapid Responder,” which is designed for emergency, security, and law enforcement services, is in the pilot testing phase.

The “Deliverator,” which is also in the pilot testing phase, is designed for delivery services.

The upcoming “Cameo” is designed to be a “smooth, silent, sustainable camera vehicle for the film and influencer industries.” (Source: “Arcimoto Announces Second Quarter 2021 Financial Results and Provides Corporate Update,” Arcimoto Inc, August 16, 2021.)

Moreover, Arcimoto’s new plastic thermoforming cell should be operational before the end of this year.

Solid Q2 Results

For the second quarter ended June 30, Arcimoto announced that its revenue increased by 167% year-over-year to $717,000. (Source: Ibid.)

As expected, the company reported a second-quarter net loss of approximately $8.2 million, or $0.23 per share, compared to a net loss of $3.7 million, or $0.15 per share, in the same prior-year period.

Arcimoto Inc ended the second quarter with $86.5 million in total assets, $38.5 million in cash and cash equivalents, and debt of $3.9 million.

“Q2 2021 was another major step forward towards Arcimoto’s long-term mission to catalyze sustainable mobility,” said Mark Frohnmayer, founder and CEO. (Source: Ibid.)

“In order to avoid an extended production shutdown due to supply chain constraints, we adjusted our build rate, and have revised our planned main line target of production output to 425 FUV platform vehicles in 2021.”

Frohnmayer added,

That said, by the financial metrics that we see as most important to the achievement of Arcimoto’s mission, Q2 was far and away the company’s best quarter to date. Our balance sheet is the strongest in the company’s 14-year history, we continue to maintain a disciplined approach to resource expenditure, and we’ve made substantial forward progress on critical fronts for the company’s growth.

(Source: Ibid.)

During the second quarter, Arcimoto Inc:

  • Closed on the purchase of a new facility that comprises more than 200,000 square feet under roof on 10 acres of land
  • Debuted the first production Roadsters
  • Demonstrated the first-ever driverless FUV, which uses remote control
  • Showcased the “Arcimoto Flatbed” utility vehicle, with piloting to begin later this year
  • Launched city and statewide partnerships and pilot programs in Tennessee and California
  • Was developing the fastest tilting three-wheel motorcycle in the world (gas or electric)
  • Continued customer deliveries in California, Washington, Florida, and Oregon
  • Started preparing to open sales and rental centers in Hawaii, Arizona, and Nevada
  • Opened new FUV rental centers in Eugene and San Diego, CA
  • Joined the Russell 2000 and Russell 3000 indices
  • Uplisted from the Nasdaq Capital Market to the Nasdaq Global Market

Analyst Take

Arcimoto Inc has been having a great year, despite industry-wide supply chain issues.

The company has a strong product and technology portfolio in the emerging EV marketplace. It also has a rock-solid balance sheet.

Arcimoto recently reported its best quarter ever, unveiled new products, and is taking meaningful steps to accelerate production and build out its market globally.

The company’s second quarter wasn’t all roses, but the long-term outlook for Arcimoto stock is excellent.