Lordstown Motors Drops as Earnings Stoke Case for Skepticism

The Lordstown Motors Corp. Endurance electric pickup truck. (Matthew Hatcher/Bloomberg News)

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Lordstown Motors Corp. shares tumbled after the electric vehicle company cut its full-year production expectations for its Endurance pickup truck and said it will need outside capital.

Shares fell 7.4%, trimming some of their earlier losses but leaving the stock down more than 50% this year. The company’s report prompted analysts at Goldman Sachs and Morgan Stanley to cut their price targets.

Risks have increased in the wake of the company’s report, according to Goldman Sachs analyst Mark Delaney. He cut Lordstown shares to neutral in April due in part to the additional risks of ramping up production and the increasingly competitive landscape, and both factors are occurring “in a more material way than we had expected.”

Among the threats was Ford Motor Co.’s announcement of plans for an electric model of its flagship F-150 pickup “at a very competitive price point,” Delaney said.

The results highlighted concern about Lordstown’s ability to meet its financial targets, Delaney said. The company increased its forecast for 2021 operating expenses, citing “COVID-related and industrywide related issues” as it progresses toward its deadline for the start of production.

“We do need additional capital to execute on our plans,” CEO Steve Burns said in a statement, which forecast that liquidity would dwindle to $50 million to $75 million by year-end from $587 million as of March 31.

“We believe we have several opportunities to raise capital in various forms and have begun those discussions,” Burns said.

“I don’t think we’ve ever considered selling the company,” Burns told analysts in response to a question during the company’s earnings call May 24. “But we are in discussions with a few strategics — large strategic investors that of course would bring something a lot more than funding.”

Without outside capital, Morgan Stanley analyst Adam Jonas said, the company’s target for year-end gross cash balance could fall below the minimum needed to run the business at the scale he had anticipated.

“While there is some glimmer of strategic value, we believe investors are exposed to outsized company and market risk,” he wrote.

Goldman Sachs cut its price target to $8 from $10, while Morgan Stanley trimmed its target to $8 from $12. R.F. Lafferty downgraded the stock to hold from buy. Lordstown has one buy, three hold and three sell ratings with an average price target of $8.69, according to data compiled by Bloomberg. The average price target was around $13 at the end of last week.

The company is holding “Lordstown Week” at its Lordstown, Ohio, facility the week of June 21 that it says will showcase its plant, vehicle, technologies and strategy to investors and customers. Goldman’s Delaney expects the event could be a positive catalyst for the company.

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