2021 is proving to be a bumpy ride for Lordstown Motors (RIDE). In a difficult as-it-is environment for all manner of new energy vehicle players, the company is also under SEC investigation following a short seller’s accusations of fraud. The shares have declined by 55% since the turn of the year, and the latest developments have only accelerated the rout.
Lordstown reported Q1 earnings on Monday, and being a pre-revenue company, investors were keen to hear good news regarding the development of its flagship electric truck – the Endurance.
Well, there were some positives to note. Beta testing is nearing completion with 48 of the 57 Betas on the road. The Endurance has also made it through initial crash testing, July should see pre-production kick off and full production is still slated to begin in September.
However, these positives were drowned out by the company stating that due to a lack of capital, it now expects to produce at best only 1,000 vehicles this year instead of the previous target of 2,200 vehicles.
Although management did add that should they secure more funding, they could still meet the previous target.
At the low end, BTIG’s Gregory Lewis thinks Lordstown would require $130 million to be able to pull the feat off.
The lack of capital is due to an upward adjustment for 2021 OPEX (operating expenses). The company now expects to spend ~$340 million, $115 million above previous estimates. While Lewis thinks there’s a reasonable explanation for the increase, it is also “another likely source of stock weakness.”
“The OPEX raise was largely driven by increased insourcing (frame tooling, a second battery line, and increased hub motor capacity), which, though we believe it was a smart long-term move, requires upfront capital,” the analyst said. “Due to this increased CAPEX, management noted their plans to raise more capital (we are thinking $200-$500M in debt capital), as they expect 2021 year-end cash liquidity of $50-$75M (ex-incremental capital).”
Accordingly, Lewis slashed his RIDE price target by half, from $40 to $20. Nevertheless, the shares’ sharp drop means there’s 121% upside from current levels. Lewis’ rating stays a Buy. (To watch Lewis’ track record, click here)
Amongst Wall Street’s cadre of analysts, Lewis is on his own. With 3 additional Holds and 2 Sells, the stock has a Hold consensus rating. As new Wall Street price target revisions have come in, at $9.83, the average price target now implies one-year returns of ~8%. (See RIDE stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.