On Thursday, BMO Capital Markets adjusted its outlook on Lion Electric (NYSE:LEV) shares, a manufacturer of electric vehicles, by reducing the company's price target to $0.80, down from the previous target of $1.00. Despite this change, the firm maintained its Market Perform rating on the stock.
The revision follows Lion Electric's Q2/24 performance, which, as in the first quarter, was adversely affected by ongoing funding delays. The company anticipates similar challenges for the second half of the year but expects a gradual recovery in 2025. In response to the softer industry demand, Lion Electric has announced additional cost-saving measures.
The company's financial health is a point of concern, with BMO Capital noting that Lion Electric's liquidity position remains challenging. The decision to lower the price target was influenced by these factors, with the new target based on a multiple of 2.8 times the company's projected revenues for 2026.
The analyst from BMO Capital expressed a neutral stance, citing that while the company's efforts to align its costs with current industry volumes are a step in the right direction, the near-term outlook remains uncertain due to the funding issues that have impacted recent results.
Lion Electric's management is actively working to navigate through the current challenges, focusing on cost reduction and operational adjustments.
The company's strategy is aimed at positioning itself for improved performance as market conditions are expected to get better in the upcoming years.
In other recent news, Lion Electric has been facing significant challenges in the second quarter of 2024, including program delays and a slowdown in U.S. deliveries.
These issues have adversely impacted the company's financial results, with Q2 revenues of $30 million and a negative gross margin of $15 million. Despite this, Lion Electric reported progress in operational and financial areas, focusing on cost reductions and liquidity management.
The company's order book remains robust with 1,994 vehicles valued at approximately $475 million. As part of its recovery plan, Lion Electric is undertaking cost reduction measures expected to save $40 million, with $10 million in recurring savings starting this quarter. The company is also optimizing facility usage and evaluating partnership opportunities for the Joliet facility to recoup costs.
In response to these recent developments, BMO Capital Markets has adjusted its outlook on Lion Electric, reducing the company's price target to $0.80 from the previous target of $1.00.
The firm maintained its Market Perform rating on the stock, citing the company's efforts to align costs with current industry volumes and the uncertain near-term outlook due to funding issues.
Looking ahead, Lion Electric is actively working to improve its financial standing and prepare for a more robust 2025. The company aims to be fully prepared for 2025 with a cost-efficient structure and profitability in the electric school bus and truck businesses. Despite the current challenges, Lion Electric's strategy and solid order book position it well for improved future performance.
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