On Thursday, BMO Capital Markets adjusted its outlook on Lion Electric (NYSE:LEV), a manufacturer of electric vehicles, by lowering its stock price target to $1 from the previous $2, while maintaining a Market Perform rating. The revision reflects ongoing concerns with the company's financial performance and outlook.
The company's first quarter of 2024 results were adversely affected by persistent funding delays, similar to the fourth quarter of 2023. The rollout of new vehicle models and battery packs has also put pressure on the company's margins. Despite these challenges, Lion Electric anticipates the second quarter will continue in a similar vein before seeing an improvement in the second half of the year.
BMO Capital's analysis suggests that Lion Electric's liquidity position remains difficult, and it is likely that the company will need additional financing in both the current year and the following year to sustain operations. The firm's stance remains neutral with a Market Perform rating, indicating no change in their view of the company's investment potential at this time.
The stock price target is now set at $1, which is based on a target multiple of 2 times the company's projected revenues for 2025. This valuation metric remains unchanged despite the revised price target. BMO Capital's assessment signals caution regarding Lion Electric's near-term financial health and the need for further capital to support its business activities.
InvestingPro Insights
As Lion Electric (NYSE:LEV) navigates its financial challenges, real-time data from InvestingPro provides additional context for investors considering the company's prospects. With a market capitalization of $233.25 million, the company's stock has declined significantly, reflecting investor concerns.
The revenue growth over the last twelve months stands at an impressive 47.86%, yet this has not translated into profitability, with a negative gross profit margin of -5.67%. This suggests that while sales are increasing, costs are outpacing revenues, impacting the bottom line.
InvestingPro Tips indicate that analysts do not expect Lion Electric to be profitable this year, and the company's significant debt burden may make it challenging to meet interest payments. However, there is a silver lining as liquid assets exceed short-term obligations, providing some cushion for immediate financial pressures.
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The company's current struggles are reflected in the price, which has fallen to $0.97, a mere 38.06% of its 52-week high. This price adjustment could be an opportunity for investors who believe in the company's long-term strategy and are willing to weather the short-term volatility. With the next earnings date set for August 2, 2024, stakeholders will be keen to see if Lion Electric's anticipated second-half improvement materializes.
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