A Game-Changing Quarter For Lordstown Motors
No, Lordstown Motors (NASDAQ:RIDE) did not begin production of the Endurance yet, but it is well on track to do so. The big news with Lordstown Motors is that it reached a definitive agreement with Foxconn for the production of the Endurance. This deal includes the sale of its Lordstown manufacturing facility and an agreement for Foxconn to use the plant to manufacture the truck as well as engage in the development of future vehicles.
What this means is an affirmation and validation of the brand, the underlying business, the Endurance pickup, and the valuation of the stock. While it will still be a few quarters before the production begins, it looks like Lordstown Motors has the capital and partner it needs to get this project to the finish line.
“Our partnership with Foxconn will unlock the tremendous potential of the Lordstown automotive plant, enable us to reduce the overall cost of bringing the Endurance to market, and position us to be able to jointly develop vehicles with a partner that has significant scale, manufacturing expertise, and a commitment to electric vehicle manufacturing as one of its key global strategic priorities. As part of the transaction, LMC and Foxconn have agreed to pursue a joint venture to jointly design and develop commercial vehicle programs for North America and internationally using Foxconn’s “MIH” open EV platform.”
Lordstown Motors Is Well Capitalized
While Lordstown Motors has been chewing through its cash, it appears to have enough capital to get the project finished. Not only is the cash-burn slowing, but the deal with Foxconn will help refill the coffers. The company reported $233.8 million in cash at the end of the last quarter with quarterly losses nearing $96 million. At that pace, the company can sustain at least two more quarters of operations and there are other factors in play.
Nearly $80 million of the loss is attributed to CAPEX, for one, and the sale of the Lordstown plant is expected to bring in another $230 million at least. Assuming there are no major hiccups and testing continues as planned, we see no reason why the company would need to raise additional capital.
The Analysts Have Soured On Lordstown Motors
The trend in analysts’ sentiment has been negative for the last few quarters and did not change with the Q3 release. The two notes that have come out include one price target cut and one downgrade from Buy to Neutral. Together, these two rate the stock as Underperform/Neutral with a price target of $4. That compares to the Marketbeat.com consensus sentiment of sell and price target of $8.78.
The consensus target still assumes some upside for the stock, but the trend is definitely down at this time, having fallen a full $5 or 35% since the last earnings reports. In our view, this could be the bottom in the market, but it may be a few more quarters before we can be sure. A lot can happen in that time for a pre-production company like this.
The Technical Outlook: Lordstown Motors May Be At Bottom
Shares of Lordstown Motors have seen a big decline over the past 10 months but might be at a bottom now. The price action has been bobbing along at the $5 to $8 range for the last few months and is testing support now. Price action popped on the early release of the Foxconn news but pulled back after earrings were released.
Support appears to be present at the short-term moving and if so, could push the stock upward. The next target for resistance is at the $7 level; if that is broken then a move up to $8 is likely. Longer-term, if the stock can get above $8 then moving up to $12 and then $16 are the most likely scenario. Based on the high short-interest as indicated by Marketbeat.com, Lordstown Motors could very well be the next big meme stock.
