Although Lordstown Motors (NASDAQ:RIDE) recently reported impressive order data, I still believe that investors should unload RIDE stock.
Given the huge valuation of the shares and the risks facing the company, I believe that there are much better electric-vehicle stocks in which to invest. For those looking for an EV name with a tremendous amount of potential, I recommend buying Ayro (NASDAQ:AYRO).
Impressive Pre-Orders and a Very High Valuation
On Nov. 16, Lordstown reported that it had obtained “50,000 non-binding production reservations from commercial fleets for its Lordstown Endurance all-electric pickup truck, with an average order size of approximately 500 vehicles per fleet.”
That’s a rather impressive number for an EV startup. Based on the Endurance’s reported sticker price of $52,500, the 50,000 vehicles ordered would result in revenue of $2.625 billion, according to my calculations.
Additionally, Lordstown reported that it had had indications of “interest” from groups that are not able to “place pre-orders, such as federal, state and municipal governments, and military fleets.”
It’s important to note, however, that not all of the “non-binding” pre-orders will turn into deliveries. In other words, some companies will renege on their pre-orders. Further, pre-orders for commercial trucks can be placed several years in advance, so the company may collect the proceeds from the pre-orders over three or four years.
Finally, with RIDE stock trading at a market capitalization of $4.675 billion, $2.625 billion of pre-orders over several years actually isn’t awe-inspiring.
The High Risks Facing Lordstown
As I pointed out in a previous column, The Next Web, a technology website, has asserted that the motors inside the Endurance’s wheels “can negatively affect handling, but not dramatically,” while wearing out parts more quickly than conventional wheels.
And I noted that one of Lordstown’s competitors, Rivian, “is working on an electric pickup truck that sounds like a truly revolutionary vehicle.”
A Much Better EV Bet
In an August column on EV truck maker Ayro, I wrote that the company had “found a niche in which it can be successful, and it has already recruited a great partner. ”
I asserted that battery-electric trucks would be a very good fit for the company’s niche of short-range deliveries.
Its alliance with huge food-truck maker Gallery Carts boded very well for the outlook of AYRO stock.
Since the article was published, the shares have soared about 150%. But the stock’s market capitalization is still only $235 million.
And on Nov. 6, Ayro reported that it had a backlog of $624,000 as of Sept. 30, while it had received $584,000 of orders “for its mobile food truck following its partnership announcement with Gallery Carts.”
Meanwhile, Ayro reported Q3 sales of nearly $400,000 and stated that Club Car, a large golf-cart maker owned by giant equipment-maker Ingersoll Rand (NYSE:IR), had ordered nine EVs from it.
In another excellent sign for AYRO stock, the EV maker raised the “production capacity” of its Austin, Texas factory from 200 electric vehicles per month to 600 per month. Finally, the company recently announced that institutional investors had bought about $10 million of its shares while acquiring warrants for over 2 million additional shares.
Those investments indicate that the institutions have a great deal of faith in Ayro.
The Bottom Line on RIDE Stock
The shares have a very high valuation, and Lordstown is making a vehicle that may be risky. That’s not a very good combination.
Conversely, the valuation of Ayro stock remains relatively low, and that company looks poised to be very successful. Given all of these points, I recommend that investors sell Lordstown’s shares and buy those of Ayro instead.
On the date of publication, Larry Ramer held a long position in Ayro.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.