Lilium shares target cut to $1.85, retains buy rating

On Tuesday, Canaccord Genuity announced a reduction in the price target for shares of Lilium N.V. (NASDAQ:LILM), an eVTOL (electric Vertical Take-Off and Landing) aircraft company. The new price target is set at $1.85, decreased from the previous target of $2.00. Despite this change, the firm maintains a Buy rating on the stock.

The adjustment in the price target reflects Canaccord Genuity's analysis of several factors influencing Lilium's financial outlook. A significant point of consideration is the finalization of a £100 million loan from KfW, a German state-owned investment and development bank.

This loan is seen as a critical step in reducing the risk profile for Lilium and its stakeholders. The receipt of this non-dilutive funding is expected to ease the path for additional capital from private investors and aid in expanding operations in France, which could potentially unlock an additional £200 million.

Lilium's current financial strategy includes the possibility of tapping into their At-The-Market (ATM) agreement to secure further capital ahead of achieving product certification. The company's existing agreements, comprising 106 firm orders, 76 options, and over 600 Memorandums of Understanding (MoUs), are anticipated to provide pre-delivery payments following the completion of manned test flights. These inflows may reduce the necessity for additional capital generation through the ATM agreement.

The company's financial status is underscored by an average burn rate of €96.5 million over the first two quarters of the year. This rate highlights the importance of securing the aforementioned German loan and a similar French loan without further delay.

Canaccord Genuity's revised price target of $1.85 for Lilium is grounded in a Discounted Cash Flow (DCF) analysis extending through the year 2035. This model incorporates assumptions about future equity raises and applies a revised discount rate of 11.1%.

In other recent news, electric aircraft manufacturer Lilium N.V. has been making significant strides. Canaccord Genuity maintained its Buy rating on Lilium's shares, emphasizing confidence in the company's technological advancements. Lilium's Q1/24 cash burn increased by 53% due to payments made to aerospace suppliers, reaching €94.7 million. Despite this, the company secured $114 million in funding to support its operations and upcoming first manned flight test.

Lilium has made progress with its prototype aircraft, MSN 1 and MSN 2, which are being used for ground testing and early manned flight testing, with the first customer deliveries expected to start in 2026. The company has also completed the first phase of integration testing for the Lilium Jet's electrical power system, a vital step towards flight conditions approval and type-certification.

In terms of strategic partnerships, Lilium has joined forces with Groupe ADP to develop a network of vertiports, aiming to establish Paris as a key hub for regional electric aviation. The company has also collaborated with the General Authority of Civil Aviation of Saudi Arabia to integrate electric Vertical Take-Off and Landing aircraft into Saudi Arabia's transportation and airspace systems by 2026.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on Lilium N.V.'s financial situation and market performance. The company's market capitalization stands at $480.79 million, reflecting its current valuation in the market. Despite Canaccord Genuity's optimistic outlook, InvestingPro Tips highlight some challenges facing the company. Lilium is quickly burning through cash and suffers from weak gross profit margins, which aligns with the article's mention of the company's high burn rate of €96.5 million in the first two quarters.

On a positive note, InvestingPro data shows a strong return of 16.09% over the last month, indicating some recent market optimism. This could be related to the developments mentioned in the article, such as the KfW loan and potential expansion in France. However, the year-to-date price total return of -34.39% suggests overall investor caution.

An InvestingPro Tip notes that Lilium holds more cash than debt on its balance sheet, which could provide some financial flexibility as the company works towards product certification and delivery of its eVTOL aircraft. This cash position may be crucial given the capital-intensive nature of the aerospace industry and Lilium's ongoing development phase.

For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Lilium, providing a deeper understanding of the company's financial health and market position.

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