Home Manufacturer fund Romeo Power Stock – First Choice for the Electric Vehicle Boom?

Romeo Power Stock – First Choice for the Electric Vehicle Boom?

10
0

Romeo Power stock went public in December 2020 through a SPAC merger with investment firm RMG Acquisition. This move allows Romeo Power to profitably raise funds to promote future growth through new partnerships, investments and R&D.

Romeo Power Inc. (NYSE: RMO) is a Los Angeles-based startup moving towards a sustainable future. The company mainly works by providing electric battery solutions for commercial vehicles. The manufacturer of electrical solutions was founded in 2016 and has continued to expand its reach since then.

Currently, Romeo Power stock is down more than 50% since the company’s IPO last December. Several important events led to the loss of value of the manufacturer of EV batteries.

But does that mean it’s time to ditch Romeo Power Inc.? Let’s take a closer look at the factors that can reverse Romeo Power’s share price.

Romeo Power Inc. Disappointing second quarter earnings

On August 16, investors saw what Romeo Power Inc. is capable of when the company released its second quarter financial results. To most people’s surprise, Romeo Power missed its estimates, and by a relatively large margin.

  • Missed income – Romeo reported second-quarter revenue of $ 926,000, which is significantly lower than analysts’ expectations of nearly $ 3 million. The drop in income is probably due to the fact that the company is still increasing its production. Another reason is the global chip shortage plaguing the automotive industry.
  • Loss of BPA – Romeo Power stock suffered a loss of (-0.22) per share, missing the estimated consensus of (-0.16) per share. Again, Romeo isn’t quite at the production level that analysts thought he would be at this point in time.
  • Cash reserves – Although the company missed its revenue and EPS estimates, it had $ 267.7 million in cash and investments at the end of the quarter.

Partly due to the global chip shortage affecting several different electric vehicle manufacturers, Romeo Power expected revenue to decline in the second quarter. The shortfall was larger than the company expected, but it did not change its plans for the future.

Finally, in Romeo’s webcast, management indicated that they did not plan to change the forecast for the full year. They referred to an expected acceleration in production in the second half of the year, especially in the fourth quarter.

Strategic developments of Romeo Power

Even with the latest hurdles from Romeo Power Inc., the energy technology company continues to move forward. The latest strategic moves place the company in the middle of the EV movement. The following developments should help the company meet its expectations and increase the Romeo Power share price.

  • New CEO – One of the most significant developments is the appointment of the company’s new CEO, Susan Brennan. She brings to Romeo Power extensive experience in the energy and automotive sectors. Prior to joining Romeo, Brennan was COO of Bloom Energy (NYSE: BE). She also worked at Nissan, running a factory with the highest output among automakers and Ford before that.
  • Long-term supply agreement – On the bright side, Romeo Power Inc. announced that it has entered into a long-term deal with LG Energy Solutions to supply lithium-ion battery cells. The agreement foresees that LG Energy will supply 8 GWh of energy in cells to Romeo Power. Romeo, in return, agreed to finance the construction of a new assembly line for LG Energy to produce the cells.
  • Test milestone – The EV battery maker has reportedly eclipsed 750,000 test miles of Romeo Power modules and batteries.
  • PACCAR Partnership – Romeo Power has entered into a five-year agreement with PACCAR Inc. (NASDAQ: PCAR) to supply its battery-powered power supplies for its fleet of commercial electric vehicles. This partnership can be significant for Romeo because PACCAR is one of the world’s largest manufacturers of commercial trucks.

These are all important developments for a startup that just went public in December. This is a lot of information that investors need to understand and process. The company is trying to expand its reach and consolidate its place in the electric vehicle market.

Battle of the Battery Companies

It’s no secret that the electric vehicle market is growing at a rapid pace. The most recent research suggests that the electric vehicle industry could reach nearly $ 2.5 trillion by 2027. This reflects a compound annual growth rate of 33%.

However, Romeo Power stock faces intense competition in the industry, with several companies vying for their market share. Just recently, one of Romeo Power’s biggest competitors announced an agreement with LG Energy for the supply of battery cells.

Investors will also need to consider other manufacturers of electric vehicle batteries such as Quantumscape backed by Bill Gates (NYSE: QS). Also Solid Power, which has not yet been released.

Romeo Power Inc. Stock Forecast – Risk vs. reward

With shares of Romeo Power Inc. down more than 50% since its IPO, investors may be concerned. Can Romeo Power stock bounce back from its recent crash?

The new CEO of the company has extensive experience in the automotive and energy sectors, especially during the ramp-up of production. As management recently noted, despite recent earnings lapses, they still plan to hit 2021 targets. This may present an opportunity for investors looking for a reasonable risk / reward setup.

Keep in mind that Romeo works in a volatile industry with the electric vehicle market doomed to turbulent growth. On top of that, Romeo Power was created via a SPAC, which usually comes with additional volatility.

If the company can continue to make smart partnerships and deals, Romeo’s equity investors can be rewarded. Romeo’s growth will depend on its ability to position itself in the booming market for electric vehicles.

Electric vehicles and renewable energies are two sectors that are expected to experience considerable growth in the years to come. To learn more about the Romeo Power stock and the latest energy trends, subscribe to our Profit trends e-letter today!


About Pete Johnson

Pete Johnson is a seasoned financial writer and content creator specializing in equity and derivatives research. He has over ten years of personal investment experience. Rummaging through 10-K forms and finding hidden treasures is his favorite pastime. When Pete isn’t doing stock research or writing, you may find him enjoying the outdoors or sweating while exercising.