Lordstown Motors (NASDAQ:RIDE) stock has lately been struggling. Investors in RIDE stock were enjoying record highs of over $31 in February. However, since then the stock price has plummeted to a 52-week low of $6.69 on May 11. It is hovering around $10.5.
Ohio-based Lordstown Motors is a pre-revenue automotive company. It aims develop and manufacture electric light duty trucks for the commercial fleet market. The company has been working on its flagship vehicle, the Endurance, an electric full-size pickup truck.
Manufacturing industries around the world are gradually turning green and an increasing number of companies have started to produce according to environmental, social, and governance (ESG) criteria. Electric vehicles (EVs) are benefiting from this trend. According to Statista metrics, “Between 2019 and 2027, the size of the global electric vehicle market is expected to increase almost five-fold to reach an estimated global market size of some 803 billion U.S. dollars by 2027.”
RIDE stock is the result of a reverse-merger of Oct. 2020, between a special purpose acquisition company (SPAC) Diamond Peak and Lordstown Motors, which was a private entity at the time. In January, Lordstown Motors announced that the group expected the completion of the first beta vehicles in March. The news was welcomed by the investors but the mojo did not last long.
Year-to-date, the shares are down more than 22%. RIDE stock could be attractive for bullish traders who believe that the current decline can only lead to an uptrend. However, I believe that this stock is not likely to make new highs any time soon. Here’s why.
How Recent Earnings Came
Lordstown Motors announced first quarter financial results on May 24. Capital expenditures came at $53 million. Total assets were $779 million. Net loss was $125 million. Diluted loss per share was 16 cents. Cash and equivalents stood at $587 million.
Lordstown Motors updated its guidance for full year 2021 and announced that the Endurance production would at best be 50% of prior expectations. Capital expenditures will now likely come between $250 and $275 million. Expected year-end 2021 liquidity is between $50 and 75 million in cash and equivalents.
CEO, Steve Burns said, “We are proud to have built 48 out of 57 of our beta vehicles and are on schedule to conclude the beta program approximately by the end of June; We recently passed two of the most difficult crash tests and, as such, believe we remain on track to deliver a 5-star rated vehicle. However, we have encountered some challenges … including significantly higher than expected expenditures for parts/equipment, expedited shipping costs, and expenses associated with third-party engineering resources.”
The Street was not thrilled with neither the results nor the guidance. And following the results, investors initially hit the sell button. However, since then some buyers have returned and the shares have returned over 20%.
Lordstown Motors Rides on Hope
Investors in RIDE stock have been full of hope over the past year. But the company has no revenue or a definite timeline to start manufacturing. Management anticipates “an acceleration of purchase commitments going into the second half of the year”.
Moreover, the company had to battle against serious headwinds since the beginning of the year. According to New York Times, “In February, a prototype it was testing in Michigan caught fire and burned so long and so hot that there was nothing left of the rubber tires.”
Then in April, another prototype dropped out after completing the first 40-mile leg of desert race known as the San Felipe 250 in Baja California. According to company officials “the truck’s telematics data revealed that it had been using significantly more energy to complete the 40-mile stint than originally anticipated.”
On June 4, management announced that it received a notice of delinquency for late SEC filing. Finally, on June 8, management warned of a possible cash crises.
The Bottom Line on RIDE Stock
EVs are clearly the trend of the future but it does not necessarily mean that all start-ups in this space will be successful. Given the headwinds, I do not expect a near-term uptrend for RIDE stock, yet.
Finally, those investors who do not want to commit capital to RIDE stock might consider buying an exchange-traded fund (ETF) that has the company as a holding. Examples include the Invesco Global Clean Energy ETF (NYSEARCA:PBD), the Invesco WilderHill Clean Energy ETF (NYSEARCA:PBW), the iShares Core S&P Total U.S. Stock Market ETF (NYSEARCA:ITOT), the Vanguard Small-Cap Growth Index Fund ETF Shares (NYSEARCA:VBK), and the Vanguard Total Stock Market Index Fund ETF Shares (NYSEARCA:VTI).
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
