After its stock market debut, what’s next for Lordstown Motors (NASDAQ:RIDE) stock? When its merger deal was announced back in August, these shares, formerly known as DPHC stock, soared. They went from around $10 per share to as high as $31.80.
But, in the weeks since the stock reached that high, the “EV bubble” has taken a breather. RIDE stock, along with other names vying to become the next Tesla (NASDAQ:TSLA,) have headed lower. Development-stage EV companies like Lordstown may offer massive long-term potential. Yet the pressure’s on for them to deliver.
Can Lordstown live up to its still-high expectations? All bets are off. On one hand, the company’s flagship Endurance EV truck may have enough factors on its side to ensure that it’s a winner right out of the gate.
On the other hand, the company has its work cut out for it. Sure, since it’s using a former General Motors (NYSE:GM) plant for its manufacturing operations, its long-term infrastructure needs have already been met. But if the company fails to turn the initial interest in Endurance into consistently strong sales, Lordstown could wind up having excess capacity.
So as the stock heads closer to the offering price of around $10 per share, what should investors do with it? RIDE stock remains a high-risk but high-potential opportunity. As the shares pull back, now is the time to consider entering a long-term position in the name.
The Near-Term Outlook of RIDE Stock
It’s no surprise that the closing of Lordstown’s merger with DiamondPeak, a SPAC, hasn’t fueled a rebound by this stock. While SPAC stocks, EV stocks, and SPAC stocks with EV catalysts were “too hot to touch” earlier this year, the speculation that lifted these stocks has started to taper off.
That being said, the party may not be over yet for SPAC EV plays, including RIDE stock. As InvestorPlace’s Sarah Smith reported on Oct. 27, there’s a major catalyst just around the corner that could fuel a second wave of “EV mania:” next week’s U.S. Presidential elections.
If former Vice President Joe Biden wins the White House, we could see large investments by the federal government in “green” initiatives. That could help drive another near-term rally by Lordstown Motors and other major EV stocks.
Sure, it may not be worth chasing RIDE stock now, in an effort to benefit from a quick short-term pop. But Biden’s push for clean energy could fuel long-term demand for EVs by governments. And, since Lordstown’s focus is on EV trucks for the fleet market, demand from federal, state, and municipal agencies for its vehicle could be strong.
But consider this a secondary long-term catalyst. More important factors remain in motion, which in tandem could drive this stock significantly higher in the coming years.
The Long-Term Bull Case for Lordstown Remains Intact
Earlier this month, I laid out how RIDE stock has all the ingredients to become a long-term winner. First, with 40,000 pre-orders for the Endurance, there’s more than sufficient demand for the commercial EV truck.
Secondly, with fuel costs a major pain point among the owners of commercial fleets, the shift to EVs could happen sooner in this market than in passenger vehicles. Thirdly, as I mentioned above, Lordstown has the infrastructure to become a major EV manufacturer.
Thanks to its purchase of the former GM plant in Lordstown, OH, the company claims it has the capacity to produce up to 600,000 vehicles per year. With the Endurance sporting a sticker price of $52,000, this could mean potential revenue of well over $30 billion, on par with Tesla’s sales today.
But before you rush out and buy RIDE stock, keep a few things in mind. Namely, the company isn’t set to deliver vehicles until the second half of 2021. While that’s not very far away, a lot could change in the meantime.
As InvestorPlace columnist Joel Bagole noted in his Oct. 20 article, since the company has yet to manufacture vehicles, who’s to say there won’t be issues when the Endurance starts rolling off the assembly lines? Any sort of manufacturing hiccup or delay could shatter confidence in this company’s ambitions, quickly sending Lordstown’s shares down to the single digits.
Don’t Throw in the Towel, But Tread Carefully
Sure, investor mania over EV stocks is starting to fade. But with Lordstown’s compelling prospects and its tremendous potential to become a major EV maker, it’s premature to throw out this baby with the bathwater.
This development-stage EV company still has much to prove. But, with multiple factors on its side, Lordstown has a better shot than many of its rivals to become the “next Tesla.”
So, what’s the play now? While this remains a solid opportunity, don’t go hog-wild. Consider RIDE stock a cautious buy as its shares pull back.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.
