Please ensure Javascript is enabled for purposes of website accessibility

Why Lordstown Motors Stock Fell in February

By Lou Whiteman - Mar 3, 2021 at 9:44AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An influential Wall Street analyst voiced caution on the EV company.

What happened

Shares of Lordstown Motors (RIDE -1.67%) 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.

RIDE Chart

RIDE data by YCharts

So what

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.

Illustration of an electric pickup getting a charge.

Image source: Getty Images.

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.

Now what

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lordstown Motors Corp. Stock Quote
Lordstown Motors Corp.
$2.35 (-1.67%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.