Why Morgan Stanley Cut Lordstown Motors Price Target

Lordstown Motors Corp RIDE has faced significant challenges being a public company in the first two quarters and needs to seek alternative sources of capital, according to Morgan Stanley.

The Lordstown Motors Analyst: Adam Jonas reiterated an Underweight rating for Lordstown Motors, while reducing the price target from $12 to $8.

The Lordstown Motors Thesis: Investors in the stock now face “outsized company and market risk,” Jones said in the note.

“RIDE’s 1Q21 results featured a larger than expected loss, higher cash consumption, a reduced forecast and a need for outside capital,” the analyst wrote.

He further noted management had significantly raised its projections for operating expenses “to account for cost overruns and unexpected vertical integration related to externally sourced components.”

“Without outside capital, the company targets a year-end gross cash balance of $50mm to $75mm which we believe is below minimum levels needed to run the business at the scale we have forecasted,” Jones said.

RIDE Price Action: Shares of Lordstown Motors had declined by 13.86% to $8.32 at the time of publication Tuesday morning.

Related Link: Lordstown Motors Shares Fall On Lowered Unit Guidance, Need For Capital

(Image: Lordstown Motors video)