Lordstown stock price is in a freefall. Is it a buy or sell into earnings?

The Lordstown Motors (NASDAQ: RIDE) stock price is under pressure ahead of its quarterly earnings. The stock declined by 15% on Thursday, bringing the total year-to-date losses to more than 78%. Worse, the stock is down by more than 6% in premarket trading.

Why Lordstown Motors stock is crashing

Lordstown Motors has had a rough ride as a public company. In 2020, as many investors were rushing to invest in EV companies, its stock jumped from $10 to $30, valuing the company at more than $3 billion. That was a relatively pricey valuation for a company that has never sold a car.

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Earlier this week, the stock jumped after rumours emerged that the company was planning a Lordstown Week in June. The week-long event is said to be held in the company’s headquarters in Ohio. The event will include factory tours, testing, and other presentations.

As such, investors were optimistic about the updates and information the company was to provide during the event.

The enthusiasm faded on Thursday for two reasons. First, Ford showcased its electric F-150 truck that received strong initial reviews, including from Joe Biden. Most importantly, the pricing range for the new truck will be better than that of Lordstown’s Endurance truck. It will start at $40,000, which is competitive than that of Endurance, which will start at $52,000. Therefore, analysts believe that many buyers will opt for Ford instead of the newer one by Lordstown.

Second, the stock declined after a rating downgrade from Wolf Research. In a note, analysts slashed the rating from a high of $27 to just $1. In April, analysts at Goldman Sachs downgraded the shares from $21 to $10 while those at Morgan Stanley slashed from $18 to $12.

Looking ahead, the Lordstown stock price will react to the company’s quarterly earnings that will come out after the market closes on Friday. There is nothing much to expect since the company is not yet bringing any money. Therefore, analysts will be looking for an update from the management about its progress and its response to Ford.

Lordstown Motors stock price analysis

The daily chart shows the perils that the RIDE stock price has gone through recently. After surging to $31.7 in September, the stock bounced back to $30 in  October and then crashed to $12.8. By doing this, the shares formed an M pattern whose neckline was at $12.80. 

Today, the shares are continuing to erase some of the gains made earlier this week. The shares are also below the 100-day and 50-day exponential moving averages (EMA) while the RSI has emerged from the oversold level of 30. 

Therefore, there is a possibility that the stock will keep falling as bears target the weekly low at $6.60. Further declines below this price will push the stock to $5.

However, we are not in normal market conditions because of activities on social media platforms like Reddit. As such, there is a possibility that traders will push the stock substantially higher soon.