Things are looking up for Lordstown Motors (NASDAQ:RIDE). A few weeks before the U.S. Presidential election, shares sold off. This was in line with similar SPAC (blank-check company) plays. But now, with candidate Joe Biden the presumed winner, it could be salad days ahead for this electric vehicle (EV) company.
Promising $2 trillion for EV infrastructure, a Biden Presidency could help accelerate the rise of EVs. But, political changes aren’t the only factor firmly in its corner.
Lordstown’s other catalysts remain in motion. Whether we are talking about healthy pre-order demand for its Endurance EV truck, or the fact the company already has the capacity to scale into a massive, profitable enterprise.
After the post-election surge, today’s prices aren’t the most optimal entry point. Yet, whether you want to add a little to an existing position, or enter a small position for the first time, today’s prices (around $17 per share) still allow you to get in on the ground floor.
RIDE Stock Has More Than Politics in Its Corner
What type of impact should we expect from the upcoming political changes that bode well for the EV industry?
Consider this recent development as just icing on the cake. The more important factors to send this stock higher were in place well before Election Day. About a month ago, I discussed how this company had all the ingredients to head higher.
Namely, the pent-up demand for its Endurance EV truck. Over 40,000 pre-orders have been made for the vehicle. More importantly, the company’s capacity to quickly scale up.
What do I mean? While other aspiring EV names, like Fisker (NYSE:FSR), are dependent on third-parties for their infrastructure, Lordstown already has much of what it needs in-house.
With a former General Motors (NYSE:GM) plant for its operations, Lordstown has the capacity to eventually produce 600,000 vehicles a year. Put both major positive factors together, and this development-stage EV company may have the best shot at becoming the next Tesla (NASDAQ:TSLA).
Yes, all of this is well known by investors. And before the election, it failed to prevent shares from going into free-fall. Despite the risk shares sell-off from here as post-election speculation cools, there’s still merit to entering a position at its current valuation.
A more favorable entry point could emerge in the near-term. Even at today’s prices, however, you are still getting in on the ground floor.
Does Lordstown Have More Room to Head Higher?
We know there are plenty of factors on the side of this company right now. But will that put more points in the stock in the near-term? How high could shares climb in the coming years?
Sure, given this company remains in the development stage, it’s tough to assign a valuation. Traditional metrics like price-to-sales (P/S) or price-to-earnings (P/E) don’t help us much while its flagship vehicle remains in pre-order mode. But, on Nov. 10, InvestorPlace’s Mark Hake ran the numbers based on the information that’s presently available.
His estimate? Assigning a reasonable multiple to the company’s potential EBITDA numbers a few years out, Hake says Lordstown could eventually be worth around $26.61 per share. But, that doesn’t mean shares are going to sit tight at today’s prices, slowly inching towards this price target over the course of several years.
Why is there a pathway to solid gains in the near-term? Chalk it up to “EV Mania,” a factor that still has plenty of runway. Just like what we’ve seen with the “green wave” companies such as Plug Power (NASDAQ:PLUG), instead of “buy the rumor, sell the news,” we could see Lordstown continue to move higher, as investors instead “buy the rumor, and buy more on the news.”
Whether it’s from positive developments out of the company or positive developments from political changes, it won’t take much to push Lordstown back above $20 per share in the coming months.
Tread Carefully, But There’s Still Upside At Today’s Prices
As shares bounce back towards prior price levels, what’s the verdict on this popular EV play? Yes, Wall Street was, and still is, well aware of the many factors on this stock’s side, but while these catalysts are somewhat priced-in, additional near-term upside could still be on the table.
With “EV Mania” still in motion, “buy the rumor, buy more on the news” could help shares retrace prior highs.
Sure, post-surge, today’s prices are not the most ideal entry point. But, Lordstown remains a cautious buy at today’s price levels.
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.
