Lordstown Motors: Q4 Miss And Recent Developments Reinforce My Bearish View

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Elevator Pitch

I complaint Lordstown Motors Corp.'s (NASDAQ:RIDE) shares arsenic a Sell.

I antecedently lowered my finance standing for RIDE from a Hold to a Sell connected concerns astir nan company's financing and accumulation pinch my earlier March 18, 2022 write-up. As per Seeking Alpha's value data, Lordstown Motors' banal value has fallen by -64% since my anterior update, while nan S&P 500 was down by conscionable -9% successful nan aforesaid clip frame.

My bearish position of Lordstown Motors remains unchanged, which justifies a Sell standing for RIDE. Recent developments propose that RIDE is still facing important challenges relating to accumulation and financing. Lordstown's caller Q4 2022 financial capacity was besides a disappointment that led to a -9% sell-down successful nan company's shares connected nan time of its results announcement.

The Wall Street's Consensus Q4 2022 Financial Projections For RIDE

The sell-side had anticipated that Lordstown Motors will grounds meaningful gross for nan first clip successful its history and study overmuch narrower losses successful nan 4th fourth of past twelvemonth anterior to its existent results merchandise connected March 6 earlier trading hours.

In circumstantial terms, nan analysts had earlier estimated that RIDE's Q4 2022 gross and non-GAAP adjusted nett nonaccomplishment per stock will beryllium $1.25 cardinal and -$0.24 per share, respectively.

As elaborate successful nan consequent conception of this article, Lordstown Motors grounded to unrecorded up to nan market's expectations.

Lordstown Motors' Fourth Quarter Results Fell Short Of Expectations

RIDE's financial capacity for nan 4th fourth of 2022 wasn't arsenic bully arsenic what nan Wall Street analysts had hoped for. This is evidenced by nan truth that Lordstown Motors' stock value dropped by almost -9% to adjacent astatine $1.02 connected nan time that its financial results were announced (March 6).

Lordstown Motors registered gross of $194,000 successful Q4 2022 relating to nan transportation of 3 Endurance EVs (Electric Vehicles). But RIDE's existent quarterly apical statement simply represented 16% of nan market's statement gross forecast ($1.25 million).

Net nonaccomplishment per stock for RIDE narrowed from -$0.42 for Q4 2021 and -$0.38 for Q3 2022 to -$0.30 successful nan astir caller quarter. However, Lordstown Motors' Q4 2022 nett nonaccomplishment per stock still turned retired to beryllium worse than nan sell-side analysts' statement bottommost statement estimate of -$0.24 per share.

Quarterly header financial metrics are nan cardinal indicators that supply a measurement of Lordstown Motors' execution capabilities. Below-expectations deliveries, gross and losses for RIDE successful nan caller 4th are disappointing to opportunity nan very least.

Production Halt Is A Worrying Development

Before RIDE reported its Q4 results connected March 6, nan institution had revealed earlier connected February 23 that it initiated a "production and transportation pause" owed to "performance and value issues pinch definite Endurance components." These issues are apt to beryllium resolved successful clip to come, but location is simply a chance that nan accumulation halt for nan Endurance EV mightiness beryllium prolonged.

At nan company's astir caller Q4 2022 net briefing connected March 6, 2023, Lordstown Motors stressed that location is simply a precocious probability of RIDE continuing to suspend accumulation unless it finds nan correct OEM partners. A twelvemonth agone successful February 2022 during nan Q4 2021 results call, RIDE had already mentioned astir nan request to activity retired partners to little nan BoM (Bill of Materials) costs for nan Endurance EV.

The Endurance EV's BoM costs connected a per portion ground unsocial without considering different expenses is astir $42,000 arsenic disclosed by guidance previously; while nan income value for Endurance EV is astir $65,000. The numbers are accordant pinch RIDE's declare that it won't beryllium capable to make a profit trading Endurance EVs unless it useful pinch OEM partners to little its BoM cost.

Further Fund Raising Is Unavoidable

As disclosed successful its Q4 2022 financial results position slides, Lordstown Motors raised astir $262.5 cardinal of caller superior past year, of which $210.7 cardinal was contributed by Foxconn (OTCPK:FXCOF) aliases Hon Hai Precision Industry Co., Ltd. (OTCPK:HNHAF) (OTCPK:HNHPF) [2317:TT]. The $210.7 cardinal of costs derived from Foxconn comprised of fixed plus divestment proceeds, and nan issuance of caller communal banal and preferred stock.

Looking forward, Foxconn is expected to supply an further $117.3 cardinal of costs for RIDE successful 2023, but $70 cardinal of superior funded by Foxconn is specifically allocated to nan associated task betwixt RIDE and Foxconn focused connected processing a caller EV.

As a constituent of reference, nan Wall Street analysts are forecasting that RIDE's rate pain will beryllium -$459 cardinal and -$482 cardinal for fiscal 2023 and FY 2024, respectively. It is reasonable to presume that Lordstown Motors requires overmuch much superior to support its business operations going.

RIDE acknowledged astatine its astir caller quarterly net telephone that Foxconn's financing will only "cover nan planned predevelopment activity for nan caller conveyance program." Lordstown Motor besides emphasized that "scaling nan Endurance" needs "substantial further capital."

Recent financing activities, statement financial projections and guidance commentary each constituent to a precocious likelihood of further superior raising for Lordstown Motors successful owed course. This will people create an overhang connected RIDE's shares.

Closing Thoughts

I proceed to person an unfavorable sentiment of Lordstown Motors' shares. RIDE's Q4 2022 miss and worrying developments relating to accumulation and financing connote that nan banal warrants a Sell rating.

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