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DA Davidson has issued a new rating for XOS Inc. (NASDAQ: XOS), downgrading the electric vehicle (EV) company's stock from "Buy" to "Neutral." The firm also adjusted the price target to $9.00, a significant decrease from the previous $17.00. This rating change follows the disclosure of the company's second-quarter results for the year 2024.
The company's financial results indicated positive developments, including an increase in sales and a gross margin that has turned positive. XOS is also on track to potentially exceed its guidance for the year 2024 and is projected to achieve positive free cash flow (FCF) by 2025.
Despite these optimistic indicators, DA Davidson has adopted a cautious stance towards recommending stocks of EV companies that include a "going concern" clause in their financial filings.
The "going concern" clause, which refers to doubts about a company's ability to continue operations in the foreseeable future, was triggered in XOS's case due to a debt obligation maturing in August 2025.
While the company has communicated that it maintains a strong relationship with its lender and anticipates resolving the issue in the upcoming months, the presence of this clause has influenced the firm's decision to adjust its recommendation.
XOS has been recognized as one of the more promising EV startups in the industry. The company's progress and potential have been acknowledged, yet the downgrade reflects a policy-driven response to specific financial concerns outlined in the company's regulatory filings.
In other recent news, XOS Inc., a manufacturer specializing in electric vehicles, reported first-quarter 2024 earnings with revenue of $13.2 million, delivering 62 units and achieving a gross margin of 21.2%.
In addition, XOS shareholders cast their votes on critical matters at the 2024 annual meeting, electing three Class III directors and ratifying the company's independent auditor, Grant Thornton LLP. The shareholders also approved the Amended and Restated 2021 Equity Incentive Plan, increasing the number of shares reserved for issuance by 1,180,819 shares.
In recent developments, DA Davidson maintained a Buy rating on XOS, citing potential for growth in sectors such as recreational vehicles, mobile charging, and school buses. Northland also reaffirmed an Outperform rating for XOS, adjusting the price target to $16 from the previous $22.50. These ratings reflect confidence in the company's future performance and strategic initiatives.
InvestingPro Insights
Following DA Davidson's recent downgrade of XOS Inc., the latest data from InvestingPro provides a deeper financial perspective on the EV company's current status. With a market capitalization of approximately $42.02 million, XOS shows a significant revenue growth over the last twelve months as of Q2 2024, at 119.67%. This aligns with the positive sales developments mentioned in the company's financial results. However, the company's gross profit margin stands at 12.75%, reflecting some of the challenges in maintaining profitability that may have contributed to the analyst's cautious stance.
InvestingPro Tips highlight that XOS may struggle to make interest payments on its debt and is quickly burning through cash, which could be factors influencing the "going concern" doubts. Additionally, the stock's price movements have been quite volatile, with a 20.81% decrease over the last month and a 39.52% drop over the last three months, further justifying the revised price target. Despite these concerns, analysts anticipate sales growth in the current year, and the stock's RSI suggests it is in oversold territory, which could signal a potential rebound for opportunistic investors.
For investors seeking a comprehensive analysis, InvestingPro offers additional tips, including insights into the company's valuation, cash flow yield, and profitability outlook. There are currently 17 additional InvestingPro Tips available, which could provide valuable guidance for those considering XOS Inc. shares in their investment decisions.
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