Investing in would-be electric truck-maker Lordstown Motors (RIDE) has turned out to be quite a bumpy “ride” for investors. Over the past year, shares of Lordstown stock are down 71% — 63% already just year to-date.
The reason behind the sharp drop can be attributed to a couple of headwinds, including the ousting of the company’s founder/CEO and his replacement with new CEO Daniel Ninivaggi late last month; dealing with an SEC investigation; and supply chain issues that have cost the company dearly.
And yet, despite the stock’s disappointing performance, BTIG analyst Gregory Lewis doubled down on his “buy” rating on Lordstown stock, and posited a target price of $10 a share — 36% above where Lordstown closed trading on Wednesday. (To watch Lewis’ track record, click here)
Lewis insists that Lordstown “continues to grind towards initial production of [its electric pickup truck model] Endurance.” Assuming the company can access the funding it needs, either through taking out an asset-backed loan (Lewis thinks the company might secure about $250 million to $300 million from a lender) or through selling stock (the company has 35 million new shares authorized for issuance, which at today’s prices could bring in perhaps $240 million) — or both — Lewis believes the company can still “get at least a few trucks in customers’ hands by year-end,” then grow to 4,000 unit-sales in 2022, and 20,000 in 2023.
Underlying Lewis’s whole thesis are two assumptions: First, that Lordstown “plans to be the first electric vehicle (EV) pickup truck company to market in the U.S.” And second, that Lewis “expect[s] pre-orders to convert to orders,” resulting in the aforementioned 4,000 sales in 2022.
Yet, both these assumptions seem a bit flawed.
First and foremost, Lewis may still believe Lordstown’s Endurance will be first to market, but in fact, that ship has already sailed. As MarketWatch reported this week, “the first electric truck [built for a customer has already hit] the road, and it’s not a Ford, Tesla or Hummer” (or an Endurance, either). Instead, it’s a Rivian “R1T pickup in Rivian Blue, driven off the production line surrounded by cheering and masked workers at the company’s plant in Normal, Illinois.”
The situation’s arguably even worse with the “pre-orders” that Lewis is hoping will “convert to orders.” Six full months ago, Hindenberg Research blasted Lordstown’s vaunted 100,000 pre-orders as “largely fictitious” or even “fake,” interviewing multiple customers who insisted that “letters of interest are non-binding.” Lordstown itself eventually admitted in June that although the company hopes pre-orders are “a significant indicator of demand for the Endurance, these agreements do not represent binding purchase orders or other firm purchase commitments.”
Lewis’ colleagues aren’t quite as upbeat. Based on 1 Buy, 2 Holds, and an additional 3 Sells, RIDE has a Moderate Sell consensus rating. At $5.6, the average price target implies ~24% downside from the current share price of $7.36. (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.
