Goldman Sachs Downgrades Lordstown Motors, Says Auto Chip Shortage Could Hit Company Particularly Hard

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Lordstown Motors Corp RIDE traded higher Monday despite a stock downgrade by a major Wall Street firm.

The Analyst: On Sunday, Goldman Sachs analyst Mark Delaney downgraded Lordstown from Neutral to Sell and reiterated a $5 price target.

Related Link: BofA Bullish On EV Battery Value Chain, But Not US-Listed Lithium Stocks

The Lordstown Thesis: In the downgrade note, Delaney said the growing electric vehicle market will be extremely competitive in 2022, including a low-priced Ford Motor Company F fleet-focused EV pickup.

Lordstown has already pushed back its planned volume ramp of the Endurance pickup from the second half of 2021 to 2022.

The chip shortage that is causing widespread issues throughout the auto industry could complicate Lordstown’s planned production ramp, the analyst said. Auto industry suppliers say smaller companies are often lower on the supplier priority list than larger automakers, potentially compounding delays for smaller companies like Lordstown, he said. 

“Our now lower 2022 EPS estimate of -$2.55 (from -$2.45 prior to reflect the incremental supply chain challenges) is well below the Street at -$1.71 on lower revenue and margins, reflecting our more cautious view on the ramp and competitive landscape,” Delaney wrote in the downgrade note.

While he is cautious on Lordstown shares for the time being, Delaney said he could become more constructive in the future if the company demonstrates it can ramp production of the Endurance faster than Goldman is projecting.

He also said the company raising a large amount of capital on attractive terms could be a positive for the stock.

Finally, strong initial demand for the Endurance could make the stock more attractive, he said.

RIDE Price Action: Lordstown shares were trading 3.37% higher at $7.82 Monday afternoon. 

Benzinga’s Take: There’s no question there will be a massive boom in EV demand over the next 20 years. The only question for investors is just how much of that boom is already priced into EV stocks and which companies will ultimately end up the long-term winners in what should be an intensely competitive market.

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Posted In: Analyst ColorDowngradesPrice TargetSmall CapAnalyst Ratingselectric vehiclesEVsGoldman SachsMark Delaney
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