On Friday, Cantor Fitzgerald adjusted its stance on Lilium N.V. (NASDAQ:LILM), downgrading the stock from Overweight to Neutral and slashing the price target to $1.00 from the previous $2.00. The revision follows the company's announcement that it failed to secure a crucial funding guarantee from the German government.
Lilium disclosed on Thursday, October 17, that its application for a €50 million guarantee, which was part of a planned €100 million convertible loan, was rejected by the Federal Republic of Germany. This development is particularly troubling for the company, which had been counting on these funds for near-term operations and to attract additional capital from other investors.
Despite ongoing discussions with the State of Bavaria for at least a €50 million funding guarantee, Lilium's financial outlook remains precarious. The company's expectations of securing €100 million from the German government, along with a €220 million guarantee-backed non-dilutive loan from the French Government, are now uncertain. If the French funding is approved, disbursements are anticipated to be around 15% through the first and second quarters of 2025, with the remainder expected between the third quarter of 2025 and the fourth quarter of 2026.
Lilium has managed to raise approximately $32 million from private capital, which is projected to be reflected in the third-quarter 2024 financials. Additionally, there is an expectation of roughly $55 million from a strategic investor, although this figure could fluctuate. However, even with these combined potential funds, analysts believe that Lilium's cash runway would only last until the second or third quarter of 2025.
The company had reported approximately €118.2 million in cash, cash equivalents, and financial assets for the second quarter of 2024, compared to €102 million in the first quarter. With an initial forecast for fiscal year 2024 cash spending of over €380 million, and assuming around €192 million in the second half of 2024, it is anticipated that Lilium will need to seek additional capital next year.
Following the news of the funding setback, Lilium's shares fell more than 20% on Friday, in stark contrast to a flat performance from the S&P 500. The valuation approach for Lilium by Cantor Fitzgerald involves a 10-year discounted cash flow (DCF) analysis, assuming a 2% long-term growth rate and a 13% weighted average cost of capital (WACC).
The firm also cites several key risks for Lilium, including liquidity concerns, potential delays in FAA/EASA certification, supply chain disruptions, manufacturing constraints, customer and safety adoption, and possible changes in legislation.
In other recent news, Lilium N.V., an electric aircraft manufacturer, experienced a downgrade from Buy to Hold by Canaccord Genuity due to the German Federal Government's failure to provide a promised €50M state loan. The firm also slashed the price target to $0.70 from $1.85. This decision has affected Lilium's financial strategy as the company was anticipating a matching €50M from the State of Bavaria, contingent on the federal government's commitment.
Additionally, the company's financial outlook was influenced by the finalization of a £100 million loan from KfW, a German state-owned investment and development bank. Despite a reduction in the price target, Canaccord Genuity maintained a Buy rating on the stock, emphasizing confidence in the company's technological advancements.
In recent developments, Lilium has made significant strides in its operations. The company debuted its Lilium Jet in Houston, revealing a new option for regional travel. The first customer deliveries are expected to start in 2026, with the first piloted flight planned for early 2025.
Furthermore, Lilium has appointed Philippe Balducchi, current CFO of KNDS, as a non-executive member of its Board of Directors. Balducchi's nomination is expected to bring strategic insights and financial acumen to Lilium's board. 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 further light on Lilium N.V.'s financial situation, aligning with the concerns raised in Cantor Fitzgerald's downgrade. The company's market capitalization stands at $362.99 million, reflecting the recent stock price decline. InvestingPro Tips highlight that Lilium is "quickly burning through cash" and "suffers from weak gross profit margins," which corroborates the article's discussion of the company's precarious financial position.
The operating income for the last twelve months as of Q2 2024 was -$352.22 million, underscoring the company's significant cash burn rate. This is further emphasized by the InvestingPro Tip noting that Lilium is "not profitable over the last twelve months." The stock's recent performance has been particularly poor, with a 1-week price total return of -21.53% and a 3-month return of -41.12%, reflecting the market's reaction to the funding setback and overall financial challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Lilium, providing a deeper understanding of the company's financial health and market position.
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