Yes, the 1990s are officially nostalgic. Maybe you were a fan of Pearl Jam or Nirvana. Or you liked catching the odd episode of Friends now and again. As author Stephen King wrote, “Sooner or later, everything old is new again.” Hence, why should the investment world be any different? The recent EV craze makes me nostalgic about the dot-com boom. Some companies are thoroughbreds while some are not. Unfortunately, for Lordstown (NASDAQ:RIDE) stock, its catalysts are evaporating with each passing day.
Sales have not materialized, the competition will only intensify going forward, and any capital it received from President Trump’s endorsement is also fading. In such an environment, RIDE stock is skating on thin ice. There are several more exciting EV plays in the space that you can explore.
Past Slipups Cast a Long Shadow Over RIDE Stock’s Future
A lot of the excitement surrounding EVs is built around speculation. Only Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO) have recorded significant deliveries thus far. Is Lordstown any different?
It was founded in 2018 by Steve Burns, who previously served as CEO of Workhorse (NASDAQ:WKHS), a startup that makes all-electric delivery vans. Workhorse is in the news these days for bidding on the much-vaunted $6.3 billion U.S. Postal Service contract to replace the agency’s aging fleet of delivery vehicles.
Lordstown owns a 6.2 million square feet plant acquired from General Motors (NYSE:GM) last year. That move brought it to President Trump’s attention. The company received wide-ranging press after the President invited Burns and the rest of his team to visit him. Lordstown unveiled its Endurance truck to the public on the White House lawn with President Trump in tow. Shares shot up after the announcement.
The truck has a 7500-pound towing capacity, and its initial price will be $52,500. The company hopes to achieve EBITDA profitability by 2022 and sell more than 100,000 units in 2024. Pretty ambitious for a firm that has just gotten started, but there you have it.
It usually would be hard to stomach these numbers. But with Burns’ history, they are doubly so. My colleague, Thomas Yeung, does an excellent job of delivering an important history lesson. Steve Burns founded AMP Holdings, a company that outfitted midsized utility cars with electric drivetrains. As Yeung reminds readers in his article, that company was an abject failure. He had a better time at Workhorse, but not by much. Hence, you can’t blame a person for being skeptical in investing his hard-earned cash when your company’s leadership has such a checkered past.
USPS Contract Brings Additional Pressure
Workhorse developed the first Endurance prototype. In exchange, it got $12.2 million in cash, a 10% stake in Lordstown, and a 1% commission on the first 200,000 units sold. So, the companies are very closely aligned. In case Workhorse wins the USPS contract outright or partially, a large chunk of the production will go to Lordstown. That will put pressure on the company to hold off on manufacturing Endurance trucks and focus on USPS trucks instead.
The competition in the EV sector is intense. You can’t afford a lull period in between where legacy automakers make inroads. We’ve already seen several cities and states ban gas-powered cars while governments impose stringent environmental regulations to reduce the carbon footprint. In short, the shift towards all-electric vehicles is a secular trend. Naturally, the market will become saturated as companies rush in to take advantage.
Final Word on RIDE stock
I maintain a “neutral” rating on RIDE stock. There is not enough to justify a lofty market cap of $4.72 billion with no sales and nothing produced. It has ambitious plans to expand, but they don’t look realistic, considering the path taken by other major players like Tesla.
The stock should continue to move northward, though. But it will have little to do with its performance. Instead, the speculation surrounding the wider EV sector will drive up its price. Plus, any positive development on the USPS contract will also push RIDE stock higher, purely due to Lordstown’s close association with Workhorse.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
