Long Road Ahead for Lordstown Motors; Shares Drop on Liquidity Crunch

A complete transformation is expected in the automotive industry as electric vehicles (EVs) strive hard to provide zero-emission transportation solutions and move toward green technologies. Though most of the manufacturers are still in the hypothetical stage, others are in the nascent stage of beginning production.  

Grappling with multiple headwinds, including inflationary pressures, rising material costs, and supply chain constraints, most of these EV stocks have lost investor confidence but are trying to ramp up production, easing the impact of disruptions. 

Lordstown Motors Corp. (NASDAQ: RIDE) is among such EV manufacturers. It is engaged in the potential manufacturing of electric light-duty trucks that is focused on the commercial fleet market.   

The company has reported a first-quarter 2022 loss of $0.46 per share, in-line with analysts’ expectations. Meanwhile, it recorded a loss of $0.72 per share in the same quarter last year. 

Lordstown Motors disclosed that $150 million additional capital will be required along with the proceeds from the sale of assets to Taiwanese contract manufacturer Foxconn, in order to bring the company’s Endurance pickup truck to road. 

The CFO of Lordstown Motors, Adam Kroll, said, “We are managing through a tough macroeconomic environment, and we are focused on managing our liquidity as we bring the Endurance to launch. At the same time, we understand that raising additional capital is critical to our ability to achieve our business plan in 2022 and beyond.” 

Following the update, shares of the EV maker lost 6.54% to close at $1.79 on Monday. 

Results in Detail 

In the first quarter, Lordstown Motors recorded operating expenses of $87.9 million, related to progress towards the commercial launch of the Endurance, down 17.2% year-over-year. 

Research and development costs came in at $61.9 million, while SG&A expenses stood at $26 million in the quarter. Quarterly capital expenditures of $21.9 million included $10.2 million on tooling for the Endurance. 

As of March 31, 2022, cash and cash equivalents stood at $203.5 million. 

CEO’s Comments 

Looking forward, the CEO of Lordstown Motors, Daniel Ninivaggi, said, “We made significant progress toward launching the Endurance during the first quarter, notwithstanding unprecedented supply chain challenges. Our highest priority remains getting the Endurance into customers’ hands so they can experience the unique attributes of the truck themselves.” 

“We also continue to work closely with Foxconn to close our pending transaction and strengthen our manufacturing and product development partnership,” Ninivaggi added. 

Guidance 

Lordstown Motors reaffirmed its target to start the commercial production of the Endurance and initial production of around 500 vehicles in the third quarter of 2022. Additionally, commercial deliveries are expected in Q4 2022. 

In its quarterly filing, Lordstown disclosed that the current material costs for building the Endurance have exceeded the planned selling price. “While we expect to achieve cost improvements over time, we do not anticipate reaching a positive gross margin for the foreseeable future,” the company added. 

Analyst Recommendations 

Following the results, Goldman Sachs analyst Mark Delaney maintained a Sell rating and a price target of $2 (12.04% upside potential) on the stock. 

The rest of the Street is bearish on the stock with a Moderate Sell consensus rating based on two Holds and two Sells. The average Lordstown Motors price target of $2.63 implies 47.34% upside potential to current levels. Shares have decreased around 52% year-to-date. 

Smart Score 

Lordstown Motors gets a 1 out of 10 on TipRanks’ Smart Score ranking suggesting that it is likely to underperform market expectations. 

The Bottom Line on RIDE Stock 

Global supply chain and logistics challenges, along with liquidity issues and rising material costs have remained concerns for Lordstown Motors. Though conditions still remain uncertain, the company remains focused on its production goals. 

Nevertheless, with the current stock price performance, low analyst ratings, weak results, and liquidity crunch as factors taken into consideration, investors might be skeptical before investing in the stock. 

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