DA Davidson downgrades Xos to Neutral on ‘going concern’ clause

DA Davidson downgraded Xos to Neutral from Buy with a price target of $9, down from $17, following the Q2 report. Xos continues to grow sales, has turned gross margin positive, and appears likely to beat 2024 guidance and turn free cash flow positive in 2025, the analyst tells investors in a research note. However, the firm says it has made it a policy to avoid recommending electric vehicle stocks with a “going concern” clause in its SEC filing. At the time of filing, Xos had debt due in August 2025, technically causing this clause, contends DA Davidson. It notes the company expects to resolve the issue in the coming months. The firm believes Xos remains one of the most-promising EV start-ups left despite the downgrade.