Lordstown Motors (NASDAQ:RIDE) ticker officially debuted on Wallstreet in October 2020 after the completion of its reverse merger with DiamondPeak Holdings (SPAC). The company received $675 million from the SPAC in funding to bolster their manufacturing and distribution of their EV Pickup truck model “Endurance”. Since the merger, the stock has followed a downward trend now currently trading at par with its PIPE price at $10 a share. However, the company reaffirmed its position that commercial production of the endurance vehicle will commence in September this year. This article will breakdown everything investors need to know about Lordstown’s stock forecast for 2022 and beyond.
Table of contents
What are the expectations for RIDE moving into 2021/22?
Firstly, the company is currently in a pre-revenue phase and is on track with their delivery expectations to begin production in Q3 of 2021. Lordstown noted they have received over 100,000 non-binding pre-orders for the Endurance truck model (as of January 2021). However, short seller Hindenburg recently challenged this claim noting the extent of these pre-orders may be misleading. They key argument from Hindenburg suggests the company has put too much emphasise on these orders, with a portion of orders unlikely to be filled.
Despite the current backlash from the Hindenburg report, the average 12 month price target from analysts currently sits at $26 a share (after Hindemburg report was released). Analyst Adam Jonas at Morgan Stanley recently lowered the companies 12 month price target to $12 a share. This represents a 20% upside from the current trading price. Lordstown is expected to respond to the Hindenburg claims “in due time” and has reaffirmed their confidence in the delivery expectations in their Q4 earnings report.
“Our commitment to developing multiple zero-emission vehicles at an affordable price to underserved market segments is a near-term goal. Longer-term, we believe we could be a disruptive force in the automotive industry with platform expansion and investments in multiple electric vehicle technologies that complement our evolution as a company.”
stated Lordstown Motors’ Founder, Chairman and CEO Steve Burns
Breaking down the revenue forecasts for Lordstown Motors
Firstly, the 100,000+ pre-orders for the Endurance truck does suggest strong commercial interest for long term shareholders. Lordstown estimates to produce 2,000 vehicles in 2021 and 32,000 vehicles in 2022 (as of January 2021). Assuming only a third of the pre-orders are met, the company will still have a backlog of orders to fill until the end of 2022 (according to RIDE presentation data). To combat this the company is looking to expand capacity to 60,000 vehicles per year with a $250-$275 million investment in 2021.
Across the board of 4 Wallstreet analysts, the average revenue forecast for 2021 is $111.19 Million. Furthermore, analysts expect the company to generate $1.51 Billion in 2022 which would represent a YOY growth of 1,259.30% (according to Yahoo finance data). However, with the uncertainty surrounding the COVID pandemic on supply constraints this may differ over time. The Endurance pickup truck will retail for $52,500 and will be assisted by a U.S. tax credit of up to $7,500. Lordstown motors expects operational-earnings margins to break-even in 2022 and surpass 10% by 2024. The company expects to produce 107,000 vehicles in 2024.
Assessing the risk
Merged EV companies such as Hyliion have taken large hits in their stock price over the past few months. Hence, this has caused some concern surrounding the stability of the growing EV industry. There is a growing range of listed EV companies now on the market. Therefore, Lordstown will need capitalise on their expected timelines for operations to ensure positions from long term shareholders. Any delay or hitch in the timing will have a serious impact on the stock price. However, as noted above in the annual earnings release there is no expected delays at the time of writing.
The time between now and the latter half of this year will likely test the sentiment of long term shareholders. The initial wave of investment in EV companies has begun to slow. Companies such as Workhorse and Hyliion are struggling to match their 2020 moving averages.
Summary on Lordstown’s Forecast for 2022
In conclusion, Lordstown Motors has exciting prospects moving into the second half of 2021. If the company can stick to their delivery forecasts without delays there is no doubt the revenue surge will see strong investor backing. However, any company in the pre-revenue phase is easy prey for short sellers like Hindenburg who can have a large impact on retail investor sentiment. Furthermore, if only a small percentage of pre-orders are actually met in 2021, investor confidence in the business will likely diminish.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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