What happened
Shares of clean energy companies, including electric vehicle names, have been surging the past month. The moves reversed an extended downtrend as the sector went out of favor with investors earlier this year. Today, shares of Lordstown Motors (RIDE -0.58%) jumped almost 20% before paring those gains to 6.7% as of 12:40 p.m. EDT. XL Fleet (XL) is another name down sharply this year. But today it jumped 10% before settling to a gain of 5.8%. Shares of Nikola (NKLA -2.41%), however, completely lost early gains and were down 3.6%.
So what
Today's market moves come on the heels of a month where XL stock gained 18%, Lordstown 33%, and Nikola 52%. The outsize gains in Nikola's stock likely help explain its lagging performance today.
Lordstown Motors' Endurance pickup truck. Image source: Lordstown Motors.
The overall trend boosting electric vehicle shares recently came after stocks in the sector had taken a hit as speculative investors cooled on the companies that were either pre-revenue or missed sales expectations. Even with the previously mentioned gains in the past month, Nikola is only up 15% year to date, while Lordstown and XL Fleet are down 34% and 66%, respectively.
Now what
There were, of course, fundamental reasons why the shares dropped from the high valuations assigned by investors last year. Both Nikola and Lordstown were challenged by the same short-seller that brought exaggerations and potentially false claims to light. Nikola has gained back some investor confidence after it updated investors that its Arizona facility, initial plans for hydrogen infrastructure, and vehicle prototype testing were on track in its first-quarter 2021 financial report.
Lordstown took a hit after its first-quarter release in late May when it told investors that even though production is still expected to begin on schedule in the fourth quarter of 2021, the company has lowered production level expectations to half of what it previously announced. Lordstown also acknowledged it will need to raise more capital to continue with its start-up plans.
In its first-quarter results also released in May, XL Fleet disappointed investors with sales below expectations, and said it doesn't expect supply chain issues to be resolved until the second half of the year.
All of these companies have a long way to go to prove to investors they can succeed, and even thrive, in a potentially huge electric vehicle market. After a dose of reality with first-quarter financial updates, and lower stock prices than a year ago, some investors are again willing to add these back to speculative portions of their portfolios.
