Shares of Lordstown Motors (RIDE -3.17%) fell 23.2% in February, according to data provided by S&P Global Market Intelligence, as investors fretted about the growing amount of competition in the electric vehicle sector.
The stock was up more than 20% in the first 10 days of the month, but lost nearly 40% of its value in the weeks that followed.
Lordstown was forged out of a former General Motors factory in Ohio, and counts GM as both an investor and a provider of technical assistance. The company's flagship product is its Endurance electric pickup, and its shares came into February with strong momentum after announcing in January it has more than 100,000 reservations for the vehicle.
Morgan Stanley auto analyst Adam Jonas tapped the brakes on the rally midmonth, initiating coverage on Lordstown with an underweight rating and a price target of $18. At the time the report was issued, the price target was more than 40% below the trading price.
Jonas is impressed with Lordstown's management and encouraged by the assistance from GM, but warned the electric pickup market is about to be overrun with competition. Some of those competitors will come from established automakers including Ford Motor, which have scale and distribution advantages.
Pickup buyers, and especially business fleet buyers, tend to like the options they have already. If asked to pick between an electric version of the Ford F-150 or take a chance on a start-up, there's a decent chance they are going to go with what they know. That's a challenge for Lordstown as it attempts to build market share.
Jonas has earned a reputation for being bullish on electric vehicle manufacturers, especially Tesla, and his skepticism likely hurts more than most on Wall Street. Lordstown shares also likely faced downward pressure late in the month after corporate cousin Workhorse Group lost out on a $6 billion contract to build the new U.S. Postal Service delivery truck.
There's nothing really wrong with Lordstown, but the company is a relatively small player in a field crowded with deep-pocketed competitors. Given the risks, some investor caution is understandable.