One of the big companies that’s seeing substantial declines in today’s session is Lordstown Motors (NASDAQ:RIDE). Like other electric vehicle (EV) stocks, RIDE stock is getting beaten up today. As of this writing, shares of RIDE stock are down 5% in early afternoon trading.
It appears much of today’s move in the broader market has to do with a stark shift in investor sentiment. There’s a seriously bearish undertone that’s building. Much of this has to do with an increasingly hawkish Federal Reserve, leading to expectations that rate hikes will continue in earnest for some time.
Inflation is serious, and higher interest rates are needed to cool this economy. However, for investors in high-growth stocks in sectors such as electric vehicle manufacturing, it’s a tough time. Indeed, on a year-to-date basis, RIDE stock had already dropped approximately 50%. That was before today’s decline, which pushed it over the 50% mark for the year.
It’s been a rough year for investors in anything tied to growth. However, there’s another reason why RIDE stock is sinking today. Let’s dive into some of the numbers investors are digesting right now with Lordstown.
RIDE Stock Plunges Following Earnings Report
It’s still earnings season. And while many of the big names have already reported, companies like Lordstown are still rolling out their numbers.
Today, Lordstown reported Q1 results that generally missed the mark. Yes, the company did burn through less cash than analysts expected, and its net loss narrowed to $89.6 million from $125.2 million in the year-ago quarter. However, the company also noted that it will require additional capital to continue to produce and deliver its Endurance pick-up truck.
Investors appear to broadly have taken the view that a previous deal with Foxconn in November would have provided enough cash to get Lordstown to deliveries. The $230 million deal, which involved the sale of Lordstown’s Ohio facility to Foxconn, was hoped to provide the capital the company needed to get to the finish line. However, the company noted that the $150 million it needs is on top of these funds, as pre-production expenses ramp up.
Lordstown reported a current cash position of $204 million, compared to $587 million one year ago. Additionally, to date, Lordstown has received approximately $200 million out of the $230 million from the Foxconn deal. Thus, until the Foxconn deal officially closes and Lordstown raises the capital it needs, it appears investors remain content to wait this one out. I tend to agree with this view.
On the date of publication, Chris MacDonald 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.