Lion Electric Falls 10.5%, Cash at $4.8M After Revenue Miss

Key Takeaway

• Lion Electric Co. stock fell 10.5% after missing revenue forecasts with $55.5 million versus the expected $69.4 million, and cash balance dropped to $4.8 million.
• Order book declined by 3% to 2,004 units due to bottlenecks in Canada's Zero Emission Transit Fund, affecting sales and delivery schedules.
• Analyst downgrades stock to underperform with a price target of $1 amid liquidity concerns and program delays; company cuts costs including layoffs for savings.

Revenue and Cash Balance Decline

Lion Electric Co. experienced a notable decrease in its stock value, dropping as much as 10.5% following the announcement of its quarterly financial results. The electric vehicle manufacturer reported revenue of $55.5 million, which fell short of the $69.4 million analysts had anticipated, according to Bloomberg. This shortfall is attributed to bottlenecks in the Canadian government's Zero Emission Transit Fund (ZETF), a program designed to assist public transit and school bus operators in acquiring new vehicles. The company's cash balance also saw a significant reduction, ending the quarter at $4.8 million, down from approximately $30 million at the close of the previous quarter.

Order Book Challenges

Lion Electric disclosed that its order book had decreased to 2,004 units, marking a roughly 3% decline from the end of February. The company highlighted ongoing delays and challenges with the ZETF program as primary factors adversely affecting its scheduled deliveries and sales efforts. Over half of the vehicles in Lion Electric's $475 million order book are contingent upon funding from the ZETF, introducing a layer of uncertainty regarding future sales and potential order cancellations or renegotiations. National Bank Financial analyst Rupert Merer noted the possibility of bolstering orders through alternative funding sources, such as US Environmental Protection Agency grants and Quebec government subsidies for school buses.

Stock Downgrade and Liquidity Concerns

Amid these challenges, Rupert Merer downgraded Lion Electric's stock to underperform and adjusted the price target to $1, citing "elevated risk related to liquidity limitations and continued delays facing the ZETF program." The company's shares traded around 97 cents in mid-afternoon in New York, reflecting a nearly 7% decline from the previous day's closing price. To address liquidity concerns, Lion Electric has undertaken several cost-cutting measures, including the layoff of 120 employees in April, in addition to previous workforce reductions in February and August. These efforts are estimated to yield $40 million in annual savings.

Street Views

• Rupert Merer, National Bank Financial (Bearish on Lion Electric):

  "Delays and challenges with approvals in that program [ZETF] continue to negatively impact the company’s scheduled deliveries and sales efforts... elevated risk related to liquidity limitations and continued delays facing the ZETF program."