Like many of last year's SPAC successes, Lordstown Motors (NASDAQ:RIDE) sprinted out of the gates after it made its public market debut. Within less than two months, early investors had a triple on their hands.
Much has changed since then. The maker of light-duty electric trucks has faced criticism around its sales prospects and been the subject of shareholder lawsuits related to management's alleged breach of fiduciary duty. Just as Lordstown had returned to its previous peak, EV stocks became public enemy number one when high growth names fell woefully out of favor.
Earlier this month, those that came along for the wild ride suddenly found the stock trading below its pre-SPAC level. Investors have since taken an interest in the stock as seen by the pickup in trading volume. Heading into Monday's earnings report, Lordstown had some momentum building. Will it continue?
What Did Lordstown Motors' Report for 2021 Q1?
Well, we know Lordstown didn't record any sales as the company is still pre-revenue. So, the first quarter financial figures we somewhat irrelevant including the steeper $125 million net loss and reduced $587 cash position.
Instead, the market honed in on management's commentary around its latest prototype activity and upcoming production launch. It said that 48 out of 57 prototypes have been completed and pre-production vehicle (PPV) builds will start in July. As part of this effort, Lordstown's battery line is installed, and the electric hub motor line is expected to be ready to go.
One number that after-hours traders didn't like was the $115 million operating expense forecast that was upwardly revised. The bump reflects higher spending on various testing processes, parts and equipment procurement, and the use of third-party engineering resources. These are reflective of both pandemic and industry-related issues.
The higher-than-expected cost profile will necessitate additional capital raising and may take the form of an Advanced Technology Vehicle Manufacturing Loan (ATVM). This is industry speak for more debt. Absent any revenue or other major developments, this news caused Lordstown stock to sell off in Monday's after-market.
What Do the Technicals Say About Lordstown Motors?
The stock has been trading below its 50-day moving average since late February which isn't a good thing. But in recent days it has made a push to reclaim the key trend line.
Volume picked up last week heading into the earnings report. For a moment, Lordstown poked above the $10 mark before some pounced on the rally as a sell opportunity.
If it can get back on its horse and climb back above $10, an epic short squeeze could unfold. That's because Lordstown remains one of the most heavily shorted stocks on the Nasdaq. The short volume ratio hovered around 30% in each session last week.
The bulls may be gaining ground in this tug-of-war. The next few days should tell us a lot about whether the stock is headed to new lows or setting its sights on a fourth run to the $30 level. If it can eventually break $30 in convincing volume, it may be off to the races.
Is Lordstown Motors Stock a Buy?
Lordstown plans to manufacture electric pickup trucks for the commercial fleet market at its 6.2 million square foot plant in Lordstown, Ohio. Its flagship vehicle, the Endurance, is being touted at the world's first full-size, all-electric commercial pickup truck. Production of the first units is expected to begin in late September.
Next month the company will host Lordstown Week at its sprawling 785-acre headquarters. The five-day dog and pony show will feature presentations, tours, and test drives for investors, analysts, and other invitees. It'll be interesting to hear analysts' takeaways from these events. Whether positive or negative, one thing is for sure—that will be an active week in the stock.
Longer-term, Lordstown's main catalyst is its ability to make inroads in an increasingly competitive EV market. The company is going head-to-head with a growing list of auto manufacturers such as Ford that are entering the space. It does have an advantage in its early entrance to the commercial pickup truck market. There will no doubt be rising demand for these types of vehicles as the world accelerates its move towards EVs of all kinds.
Of course, Lordstown has its share of risks. Despite all the fanfare, it is still very much an unproven company. Will customers flock to the Endurance as they have to Tesla's vehicles? Can costs at the massive manufacturing plant be kept in check and efficiencies gained?
Until we start seeing some revenue on the books and indications of customer interest, Lordstown will remain a shot in the dark. Investors willing to take that risk could be rewarded handsomely. The less speculative among us may prefer to wait until management delivers on this show-me story.
At less than $9 a share, Lordstown Motors may be worth taking for a spin.
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