Romeo Power (NYSE:RMO) has been in the spotlight this week after its timely debut on Wallstreet. The company officially began trading on the 30th of December 2020, following the completion of its reverse merger with RMG Acquisition Corp. The companies first days of trading saw a decline of 35%, after PIPE investors and speculators capitalised on pre-merger gains. This article will breakdown everything you need to know about Romeo Power stock as we enter 2021.
Table of contents
Who are Romeo Power NYSE:RMO?
Firstly, Romeo Power is an American small-cap company who designs and manufactures lithium-ion battery modules and packs for the commercial electric vehicle market. The Californian based company peaked investor attention after RMG Acquisition Corp had announced its potential to the world.
“Since our IPO in early 2019, we have evaluated nearly 150 investment opportunities in search of a company with an industry-leading disruptive technology in the industrial or energy sector. Romeo Power stood out as a differentiated leading battery technology company for commercial electric vehicles, a sector that we think is at an inflection point and poised for unprecedented growth.”Robert Mancini, Chief Executive Officer of RMG,
Romeo Power stock forecast for 2021 – beyond the merger
Firstly, the year ahead for Romeo Power marks a new chapter for the EV battery innovator. Furthermore, the additional $384 million cash injection is set to “provide capacity expansion and R&D to further develop the next generation of battery system technologies for commercial vehicles”.
Although RMO has been on Wallstreet for a short period of time, it already has price target coverage from financial analysts. According to MarketWatch data, the average 12 month price target is set at $35 a share. This suggests an upside potential of 85% from the current trading price. In other words, the general 12 month outlook from the price targets available remains bullish for 2021.
However, it is important to understand Romeo Power will eventually receive coverage from larger institutions such as Morgan Stanley and Credit Suisse. These institutions have a stronger bargaining power with their price targets, so this is something to watch in 2021.
Romeo Power currently has $545 million in contracted revenues in the pipeline, solidifying its financial positioning. In addition, it’s prevalent announcement in November this year confirmed an agreement with an up and coming EV manufacturer Lion Electric. The contract is expected to generate $234 million in revenue for Romeo Power over a five-year period beginning in 2021. Romeo power is also publicly to have a customer base that represents 70% of the North America Class 8 market.
The risk associated with Romeo Power stock
Evidently, the past few days of trading have shown the immediate trends we see after a reverse merger is completed. PIPE investors and pre-merger speculators will tend to ride the momentum until the company is public. This is an unstable platform to balance on for the time being. Newly listed companies tend to find their feet after initial speculation. Therefore, it is important price in the risk associated with an initial sell off.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.