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Facedrive (TSX:FD) Stock Is up 200% in 2021: Should You Buy, Sell, or Hold?

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Investing in quality growth stocks is perhaps the most effective way to create long-term wealth. Investors need to identify companies that have multiple growth drivers, secular tailwinds, and an expanding addressable market. These companies are well poised to generate market-thumping returns and consistently beat the broader market.

Let’s take a look at one such stock on the TSX that has gained significant momentum recently.

Facedrive stock has more than tripled year to date

Shares of ride-sharing company Facedrive (TSXV:FD) have been on an absolute tear ever since it went public back in September 2019. Since its IPO, Facedrive stock has gained a staggering 2,240%, and it has returned over 200% in 2021 as well. This means a $1,000 investment in Facedrive IPO would be worth $23,400 today.

Facedrive is a ride-sharing platform that is committed to providing green transportation solutions for drivers and riders. Earlier this month, it launched Steer, which is a high-growth electric vehicle subscription service and is expected to be an integral part of Facedrive’s TaaS (transportation-as-a-service) vertical.

The service has been launched in Toronto and is scheduled to begin in the first week of March. Steer is a U.S.-based monthly subscription service and was acquired by Facedrive. This acquisition should complement Facedrive’s original ride-sharing and food-delivery services.

Steer is backed by Exelon, which is a Fortune 100 company and the largest producer of clean energy south of the border. In fact, Steer was created with an aim to challenge traditional car ownership and accelerate the switch towards eco-friendly transportation.

The automotive subscription services market is projected to grow by US$9.15 billion between 2020 and 2024. According to Facedrive’s press release, “Steer has achieved multi-million annual recurring revenue in less than 12 months of operation.”

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Facedrive Foods is another growth driver

Last year, Facedrive entered the food-delivery vertical after its acquisition of FoodHwy’s and Foodora’s assets. Facedrive Foods is experiencing robust growth with 4,100 meal deliveries per day on average.

It has partnered with 4,425 restaurants in Canada and has a user base of 250,000. The food-delivery platform is operational in 19 Canadian cities, including Toronto, Montreal, and Ottawa with further expansion plans in other regions as well as in the U.S.

Facedrive Foods has managed to take advantage of the shift in buying patterns and consumer behaviour in the wake of the COVID-19 pandemic. As people are largely staying at home, food-delivery companies have experienced a massive surge in demand.

Facedrive Food has now expanded into similar verticals including grocery delivery services as well as connecting supermarkets and convenience stores to the end customer. It now intends to launch a subscription service for loyal customers where they can benefit from cost savings over a period of time.

What’s next for investors?

Facedrive is expanding at a rapid pace. However, this growth needs to be sustainable as well as profitable. In the first nine months of 2020, it generated less than $800,000 in total sales, and given Facedrive’s current market cap of $4.57 billion we can see the company is trading at an extremely steep valuation.

It might take several years for Facedrive to turn profitable which means it cannot afford to have even a single quarter of less-than-impressive sales. Investors should brace for a ton of volatility in Facedrive stock in the upcoming months. Alternatively, investors with a high-risk appetite may also view a major correction in the stock as a buying opportunity.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. 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, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

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