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 below its PIPE price at $10 a share. The company has had a tail of bad news this week as the CEO and CFO have both resigned alongside an SEC filing highlighting current funding issues which may close the businesses operations. This article will breakdown everything investors need to know about Lordstown’s stock forecast.
Table of contents
What are the expectations for RIDE over the next 12 months?
Firstly, the company is currently in a pre-revenue phase and had advised in April that deliveries are expected to begin production in Q3 of 2021. Lordstown also noted earlier this year that they had received over 100,000 non-binding pre-orders for the Endurance truck model (as of January 2021). However, short seller Hindenburg challenged this claim noting the extent of these pre-orders may be misleading. The key argument from Hindenburg suggests the company has put too much emphasise on these orders, with a portion of orders unlikely to be filled. In response, Lordstown Motors arranged a Special Committee which engaged Sullivan & Cromwell LLP to conduct an investigation.
The findings of this investigation noted that “Lordstown Motors made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate.” As Hindenburg highlighted, some of the orders for the Endurance truck were from fleet owners that did not have the resources to actually go through with the order. These findings sent the share price into free fall, dropping 18% yesterday.
What are analysts saying about Lordstown Motors?
Over the past month, institutions have weighed in on the current news impacting Lordstown Motors. The average 12 month price target over the past month sits at $6.40 a share (downside of 32%). Analyst Jaime Perez at R.F Lafferty recently lowered the companies 12 month price target to $3 a share. Perez noted that the downgrade comes after the resignation of the CEO and CFO. The analyst highlighted the uncertainty of the companies future and share price volatility.
Breaking down the revenue forecasts for Lordstown Motors
Firstly, the company has advised in its most recent filing that the company expects to deliver its vehicles in Q1 of 2022. From data obtained in the companies investor presentation in August 2020, Lordstown estimates to produce 2,000 vehicles in 2021 and 32,000 vehicles in 2022 (as of January 2021). This issue is now transparency for investors, as Lordstown cannot affirm what the actual rate of interest is for the vehicle.
Across the board of 6 Wallstreet analysts, the average revenue forecast for 2021 has dropped to $67 Million from $111.19 Million in April. Furthermore, analysts expect the company to generate $1.17 Billion in 2022 which would represent a YOY growth of 1,600% (according to Yahoo finance data). However, with the uncertainty surrounding the future of the business and its cash position does place additional skeptics on these numbers. The Endurance pickup truck is expected to 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 according to their investor presentation in August 2020. The company also noted they expect to produce 107,000 vehicles in 2024.
Assessing the risk of RIDE stock
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 not only the positions from long term shareholders but to ensure the business can remain running. Any delay or hitch in the timing will have a serious impact on the stock price further.
In addition, the timing of the CEO and CFO departure, as well as the uncertainty surrounding the demand for its vehicles is a key concern. 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 and the new Lordstown Motor management will need to implement exceptional leadership to ensure the longevity and future of this business.
Summary on Lordstown’s Forecast for 2022
In conclusion, Lordstown Motors has entered a rough patch of stock performance alongside management changes. Even if the company can stick to their delivery forecasts without delays there is also the question surrounding its cash position. The next few months are vital in determining how the stock will perform in the long run.
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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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