Insights

Why Lordstown Motors Stock Jumped on Thursday

What happened 

Shares of electric vehicle start-up Lordstown Motors (NASDAQ: RIDE) jumped as much as 27.3% in trading early on Thursday after the company reported second-quarter earnings. Shares gave back most of those gains by late morning and are only up 2% at 3:15 p.m. ET. 

So what 

Management reaffirmed a third-quarter 2022 target for commercial production of the Endurance truck with deliveries beginning in the fourth quarter. Despite not generating any revenue, the company reported net income of $63.7 million, or $0.32 per share, after selling its manufacturing plant to Foxconn. 

Cash on hand was $236 million at the end of the quarter and management said it has “more runway and will need to raise less capital in 2022 than previously forecasted.” This is generally bullish for the company’s future dilution

Now what 

Investors were excited about Lordstown moving closer to production and having more cash on the balance sheet, but there are still very real challenges for the company. Management expects production to be very slow at first and more capital will be needed to expand production. It’s also unclear what demand will be for trucks with all of the competition hitting the market. 

This is still a high-risk stock and today’s price action shows how volatile it can be. Until production trucks hit the street and real revenue comes in, this is a stock I’m going to stay out of. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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