Lordstown Motors (NASDAQ:RIDE), a fairly new name in electric vehicle circles, recently found itself under fire from a familiar source: Hindenburg Research. For those who find the name familiar, Hindenburg Research also notably went after one other major figure in the electric vehicle space: Nikola (NASDAQ:NKLA). The Lordstown Motors report seems to be similarly damaging, but for largely different reasons.
Oh, The Humanity (Again)
Back on Friday, Hindenburg Research rolled out an 8,000-word report taking aim at Lordstown Motors, alleging that the electric truck maker brought out several fake orders for its product line. The greatest beneficiary of these fake orders, the reports note, appears to have been the Endurance pickup truck.
Moreover, the report brought out a series of quotes from former employees that were largely uncomplimentary, referring to Lordstown's current CEO Steve Burns as a “con man,” noting that the Endurance project is actually several years behind schedule. Comparisons were reportedly made between Burns and famous circus proprietor P.T. Barnum. This casts substantial doubt on the notion that Lordstown will be able to start production this fall as some had believed the case.
Burns, meanwhile, fought back against the report directly, calling it packed with “...half-truths and lies.” Burns noted that the 100,000 pre-orders the company had received so far were never really meant to be considered solid commitments to buy, and Burns also denied the notion that the company's production plans were not on track.
Analyst Picture Limping Boldly Toward Bullishness
As for the broader analyst pool, our latest research finds some skepticism in Lordstown Motors, but a trend that's sliding more toward bullish very gradually. Six months ago, there was no picture available at all, but three months ago, coverage began and went immediately to “hold”, where it's been ever since.
Three months ago, the company had two “sell” ratings and one “buy” rating. That improved quite a bit a month ago, as the company had three “sell” ratings and two “buy” ratings. That's also where we are today, suggesting that there aren't that many analysts even considering Lordstown Motors to begin with.
The price target saw similar action, kicking off three months ago at $20 before going to $25.20 a month ago, and staying there to this day.
There hasn't been a lot of movement for this company; the latest came in as Morgan Stanley started coverage on the stock back in mid-February, rating it “underweight” and offering an $18 price target. That was all of the coverage for this year except for Wolfe Research, who upgraded the stock from “underperform” to “peer perform” and raised the price target from $14 to $27 accordingly.
Wait For the Dust to Settle
The Hindenburg Research report is likely to do some damage to Lordstown going forward. Just look at what the Hindenburg report on Nikola did; the company started a downward track pretty much at the same time the report came out and Nikola hasn't recovered since. It tried to stage recovery in late November and again in late January, but neither attempt caught and the company is well off its highs seen back in June 2020. There was evidence of decline before the report, however—July 2020 was not kind to Nikola—but all attempts to get back to even September's pricing have been balked.
Lordstown's proposition of an electric pickup that offers a lot of what pickup owners will want—a towing capacity of 6,000 pounds for starters backed up by a 250-mile range between charges—should have given the company quite a bit of extra attention in the market. The notion that it's nowhere near as popular as its pre-order count suggested will likely come as a blow. Worse yet, this may have been the perfect competitive prospect for the Cybertruck from Tesla (NASDAQ:TSLA), but Tesla will now be able to make headway by asserting that its pickup is actually available.
With reports that one of Lordstown's biggest buyers, E Squared Energy—who has reportedly filed a pre-order for 14,000 Endurance models, a $735 million order—is actually a company run out of a Texas apartment with two employees, that's going to deliver a real hit to Lordstown's future. Those considering an investment with Lordstown may want to wait for the dust to settle first, and be ready to move quickly. If the Hindenburg report proves accurate, Lordstown will take it on the chin accordingly. If the Hindenburg report is proved wrong, though, there will likely be a flood of investment into a serious competitor for Tesla.
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