Electric vehicle manufacturer Lordstown Motors (NASDAQ:RIDE) – which specializes in light-duty vehicles aimed at the commercial fleet market — reported its first quarterly profit, according to Reuters. Further, management provided a business update, including production expectations. Though RIDE stock jumped over 20% in the morning hours, the gains faded to about 8% up in the afternoon session, possibly reflecting significant industry-specific challenges.
Interestingly, Lordstown has yet to sell a vehicle. Per the company’s press release for its second quarter of 2022 earnings report, the EV manufacturer generated “an operating profit of $61.3 million, including $120.1 million from the sale of the Lordstown facility, consisting of a $101.7 million gain on sale and $18.4 million in operating expense reimbursement.”
Just as importantly if not more so, Lordstown disclosed that it continued to make progress with “testing, validation and certification activities” to prepare its Endurance crew-cab style pickup truck for “Q3 commercial release production and Q4 customer deliveries.”
As well, management stated that its ending cash balance of $236 million was above internal expectations and extends its runway, “due in part to disciplined expense controls and rigorous program management.”
While the above results were certainly positive for RIDE stock, the double-digit intraday gain transitioning to a more modest bump higher may reflect Wall Street’s measured optimism. Over the trailing year, shares are still down about 48%, emblematic of the troubles facing upstart EV enterprises.
RIDE Stock Still Faces Significant Pressures
Although Lordstown Motors’ Q2 disclosure provided some positives for investors to chew on, it was in some ways a mixed bag. For instance, while the company’s Q3 production goals may be on track, the fact that it only expects to produce about 500 vehicles through early 2023 is an “extremely slow production ramp-up by industry standards,” according to CNBC.
Further, Lordstown CFO Adam Kroll stated that the company “will need to raise less capital in 2022 than previously forecasted” thanks largely to disciplined cost controls and the better-than-planned cash position extending its fiscal runway. At the same time, Kroll acknowledged that “our success and ability to execute our plan remains dependent upon our ability to raise additional capital.”
The additional capital raise is necessary to achieve Lordstown’s 500-unit production goal, which again is already a low barometer for the industry.
In addition, many investors are skeptical about RIDE stock, in part because the underlying business has burnt so many early believers. Per CNBC, “Lordstown was initially expected to be among the first, if not the first, company to release an electric pickup truck, with initial estimates as early as 2020.”
However, rivals like General Motors (NYSE:GM) and Rivian Automotive (NASDAQ:RIVN) beat Lordstown to the punch, with the latter struggling against multiple internal problems.
Why It Matters
To be fair, few EV companies or legacy automakers transitioning to electrification are doing well. Over the trailing year, GM is down 31% while RIVN has hemorrhaged a staggering 64%. By this comparison, RIDE stock slots somewhere in the middle of mediocrity. However, Lordstown arguably faces the greatest credibility challenge.
Its woes have been heavily documented. The New York Times provided some of the most alarming coverage of RIDE stock, including testing gone dangerously awry as well as a Securities and Exchange Commission (SEC) investigation. Coupled with the resignation of Lordstown founder and former CEO Steve Burns, the EV maker clearly has work to do to regain the trust of the investment community.
On the date of publication, Josh Enomoto 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.