Autos

Goldman Sachs Slashes Ratings on EV Makers Fisker, Lordstown

Global sales of battery-electric vehicles (EVs) is expected to rise by around 70% year over year in 2021 to around 4.25 million, according to IHS Markit. That total represents about 5.6% of the total global market for new cars.

By 2025, the research firm expects global sales of EVs to exceed 12.2 million, and Goldman Sachs expects electrified vehicles (including hybrids) to account for 20% of total global sales that year.

These are sizable numbers, but there is a lot of competition for those sales. What will separate the winners from the also-rans, according to a new report from Goldman Sachs, are time to market and a modular product platform that unites powertrain efficiency and tightly coupled hardware and software with a strong brand and large ecosystem for the vehicles.

Recent announcements from Ford, GM and, especially, Volkswagen of massive investments in EVs could change the landscape. GM plans to invest around $20 million in EVs by 2025 and another $7 billion in autonomous vehicles (AVs). Ford has announced a total investment of some $20 billion in EVs and at least another $7 billion in AVs. Volkswagen plans to spend about $42 billion on EVs and another $13 billion on hybrids by 2025 and another $32 billion on digitalization and software.

With all that investment flowing to the top, it is only reasonable to expect some players to get left behind. Goldman Sachs on Wednesday lowered its rating on EV maker Fisker Inc. (NYSE: FSR) from Neutral to Sell and cut the 12-month price target from $15 to $10. The analysts also cut the rating on Lordstown Motors Corp. (NASDAQ: RIDE) from Buy to Neutral and chopped the price target from $21 to $10.

Regarding Fisker, the analysts say they are “incrementally concerned about what we believe is the company’s late time to market … as competition increases.” Fisker does not expect its Ocean SUV to be in production until the fourth quarter of 2022. That’s six months after new all-electric sport utility vehicles from Toyota and Cadillac and a full year behind a Mercedes-Benz luxury SUV and a Lucid Air sedan.

Fisker is outsourcing its auto manufacturing and Goldman Sachs sees that as a positive, as it does the presence of founder Henrik Fisker, an early proponent, and builder, of EVs. However:

We would look to be more positive on the stock if we were more confident that Fisker could bring not only differentiated products to market but also in a time frame that would allow the company to establish a mainstream market presence in EVs. We could also be more constructive on the stock if we were more positive on long-term margins …

Lordstown is planning to get its Endurance all-electric pickup to market by the third quarter of this year, about three months behind Rivian’s R1T and six months before Tesla’s planned launch of its Cybertruck and Ford’s introduction of an all-electric F-150.

The truckmaker’s stock has performed poorly compared to others on the Goldman Sachs Americas Buy List, down 50% compared to a median of a 13% gain and the S&P 500 median of up 14%:

We attribute the underperformance to investor concerns about the company’s ability to enter the market on time given its tight timetable (the company is in the process of making beta vehicles now and hopes to start production in September 2021) and also about what demand will be for its product …

Lordstown ran its Endurance pickup in the 290-mile Baja Loop Race on April 17 — and the truck’s battery expired after about 40 miles. The company said conditions such as deep sand and rough terrain placed higher-than-expected energy demands on the battery but that “key aspects of the truck like the hub motors performed well.” The analysts noted, “Given the focus the company placed on finishing this event and it being so close to the September 2021 planned start of production, we consider it to be an incremental concern.”

Fisker’s stock has dropped nearly 5% as of late Thursday morning to trade at around $14.40, in a post-IPO range of $8.70 to $31.96. The consensus price target on the stock is $27.13, and four of seven brokerages rate the shares a Buy or Strong Buy.

Lordstown shares traded up about 3%, at around $10.00 in a 52-week range of $8.79 to $31.80. The consensus price target on the stock is $23.17, and three of five brokerages rate the stock a Buy or Strong Buy.