Lordstown Motors Stock Price Rises 6% – Time to Buy RIDE Stock?

Lordstown Motors (RIDE) stock was trading almost 6% higher in premarkets today continuing its good run from yesterday. The stock is however still way below its 52-week highs.

Lordstown Motors had gone public through a SPAC (special purpose acquisition company) merger which has been the preferred listing model for companies in the green economy. What’s the forecast for RIDE stock and should buy the startup EV (electric vehicle) company?

Lordstown Motors recent news

Lordstown Motors stock is rising today on reports that the company is in talks to sell the Ohio factory to Taiwan’s Foxconn. Notably, Lordstown Motors gets its name from the same facility that it had acquired from General Motors. GM’s decision to halt production at the plant had come under criticism as it came at a time when President Biden was touting the success of his Make in America program.

Last month, RIDE’s CEO Dan Ninivaggi had hinted that the company might look at monetizing the facility. “The key to unlocking financial potential is maximizing the value of the Lordstown facility,” Ninivaggi had then said. He added, “We are exploring a number of alternatives. It could take a number of different forms. That is job one for me.”

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RIDE is facing a cash crunch

RIDE is facing a cash crunch and earlier this year it said that it risks running out of cash by next year. The company has also entered into an agreement with a private equity company to raise cash by selling shares. The stock has been in freefall this year after it was accused by Hindenburg Research of multiple wrongdoings including inflating the order book. Lordstown Motors’ CEO and CFO had to resign after the board completed its inquiry into the allegations.

Hindenburg Research allegations

Last month, the company appointed Ninivaggi as the CEO. Ninivaggi, who has previously worked with Icahn Enterprises said “I believe the demand for full-size electric pickup trucks will be strong and the Endurance truck, with its innovative wheel hub motor design, has the opportunity to capture a meaningful share of the market.” He added, “With an absolute focus on execution, I look forward to working with the talented Lordstown management team, our suppliers and other partners to bring the Endurance to market and maximize the value of our assets.”

RIDE stock had spiked after his appointment but had subsequently fallen. The stock has been in an uptrend of late and has recouped some of its recent losses. However, it trades at a fraction of its 52-week highs and is even trading below the SPAC IPO price of $10.

Lordstown Motors stock forecast

Wall Street analysts are not too bullish on Lordstown Motors stock though and its median target price of $5 is a 32% downside over current prices. The street high target price of $10 is a 35% premium while the street low target price of $1 is a discount of 86%. Of the seven analysts covering the stock, only one each rate the stock as a buy and a hold. The remaining five analysts rate RIDE stock as a sell.

Earlier this week, Goldman Sachs had downgraded RIDE stock from a neutral to sell while maintaining its $5 target price. However, BTIG analyst Gregory Lewis issued a bullish note on the stock with a buy rating and a $10 target price. According to him, RIDE “continues to grind towards initial production of [its electric pickup truck model] Endurance.”

RIDE stock long term forecast

The pickup segment is among the most profitable segment for automakers. For decades, the market has been dominated by Ford’s F-150 which has been North America’s best-selling pick-up for decades. Lordstown’s first model, the Endurance pickup, would be up against competing models from Tesla, Rivian, and Ford.

Ford’s F-150 all-electric will also debut next year. The market for electric pickup trucks would become very crowded and Lordstown would have to come up with something really compelling to grab the attention of buyers. Overall, while the outlook for the electric vehicle industry looks positive, Lordstown Motors has to go a long way in establishing its brand. However, if the company can come up with exciting products and execute well on the manufacturing and delivery of Endurance pickup, it could be a good long-term investment.

Should you buy Lordstown stock?

Lordstown Motors stock looks like a risky bet considering both the operating and financial risks. While the stock could potentially be a multibagger if it executes well, it fails to instill confidence. The market has also been apprehensive of startup EV companies amid the execution risk.

With unproven technology and products, startup EV companies like Lordstown are a risky bet. However, if the stock comes down from these levels, it could be worth a look.

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