Lordstown Motors price predictions: Analyst sees RIDE stock crash to $ 2
The electric vehicle market may be booming, but the way forward for all affected companies is not necessarily straight. VE start-up Lordstown Engines (NASDAQ:STROLL) has just been the victim of a bearish price target issued by an analyst. As a result, RIDE stock reacted in a way that supports this assumption, plunging almost immediately.
What’s going on with RIDE Stock
Last night, Morgan Stanley analyst Adam Jonas issued a demotion, taking RIDE stock from a “hold” to a “sell” while reducing its target price for the stock from $ 8 to $ 2. This is exactly the kind of drastic prediction that can trigger a massive sell off, and so far that seems to be what we are seeing.
RIDE stock has fallen over 7% in pre-market trading today and at the time of writing this is down 6.5%.
This follows a profitable previous week after Lordstown announced a partnership with an international electronics producer Foxconn, which pushed shares up 8%.
What this means
Jonas has acknowledged the benefits of the partnership for Lordstown, but doesn’t think it should mean much to investors. As he stated in the report “While the deal with Foxconn helps secure the future of the Lordstown plant and saves time to explore other business opportunities for RIDE (new programs, new platforms -forms, new segments to develop), we believe that there would probably be little left for shareholders.
The near-term future in the red for RIDE stocks that he sees stems mainly from the deal Lordstown will receive on the sale. According to the report, the $ 230 million the company will generate is less than 20% of the plant’s overall value.
Why is this important
Assuming everything Jonas says to be true, Lordstown would certainly suffer a loss in the sale of the factory.
The company’s cash requirement is clear, as its cash balance of approximately $ 225 million is a decrease of $ 366 million from what it was at the end of the previous quarter. That said, Lordstown needs cash to expand its manufacturing operations and begin limited production on its high-profile EV truck, which is slated to begin production in late 2021.
Electric vehicle producers around the world have failed to meet their production targets and Lordstown does not want to be one of them. Bringing an electric truck to market successfully could help get the company back on track, especially a truck made on American soil where such vehicles are still not produced on a large scale.
The million dollar question is: will sales of the new model be enough to make up for the loss the company has suffered in the upcoming sale? Adam Jonas doesn’t think so, but the action is worth watching as the deal and operations move forward.
At the time of publication, Samuel O’Brient had (directly or indirectly) no position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication guidelines.