Romeo Power (NYSE:RMO) has been in the spotlight this week after the company announced a 5 year supply deal with EV manufacturer, PACCAR. The company officially began trading on the 30th of December 2020, following the completion of its reverse merger with RMG Acquisition Corp. Romeo stock has seen a steady decline since its debut, following the majority of the SPAC EV sector over the past 2 months. However, the recent news of the supply deal saw RMO stock gain 59%. This article will breakdown everything you need to know about Romeo Power stock as we move into 2021/22.
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. The $384 million cash injection from the SPAC merger is going to “provide capacity expansion and R&D to further develop the next generation of battery system technologies for commercial vehicles”. However, investors are getting excited about the new PACCAR deal which will see a 5 year supply of Romeo batteries. Although it is unclear on how much revenue this partnership will provide for the company, it is clear investors can see strong upside.
The partnership with Romeo will further enhance PACCAR’s zero emissions product offerings that improve customers’ operational efficiency and environmental impact,”said Darrin Siver, PACCAR senior vice president.
Analysts Price Targets for Romeo stock
The general consensus amongst Wallstreet analysts holds an overweight rating with a mean target price at $13.54. The mean target price gives an implied return of 5.8% from the current trading price. Below are the most recent price target set by institutional analysts:
- BTIG 31st March 2021 : – Analyst Gregory R. Lewis downgraded his price target to $30.00, which implies a 134.4% return from the current price of $12.80 (7th April). This price target had a high impact on the share price being the “street high” target.
- Morgan Stanley 31st March 2021– Lowered their price target to $7.00 and gave an underweight rating. This target had a high impact on the share price due to the stock trading above $10 a share prior to the coverage release.
- Cowen & Company 15th March 2021 – Analyst Gabriel J. Daoud Jr. initiated coverage at $18.00 a share with a Overweight rating. Daoud noted to investors that Romeo was positioned “further downstream” with a focus on battery module and pack production for commercial vehicles.
We can see a downward trend if we look back into the history of targets since merger completion. However, Romeo investors have peaked interest after the new 5 year supply deal with EV company PACCAR. We will see if Wallstreet analysts see the potential in this deal as we move into the second quarter.
Revenue forecasts for Romeo
Firstly, three Wallstreet analysts forecast the current quarter revenue to be $7.83 Million. This is projected to jump to $16.17 Million in the next quarter (June ’21). The annual revenue forecast for 2021 shows an estimate of $139.3 Million which equates to a sales growth of 1,452.3%. This forecasted figure for 2021 is expected to more than double in 2022 with an average estimate of $298.73 Million by 2022.
Romeo Power currently has $545 million in contracted revenues in the pipeline, solidifying its financial positioning (as of January 2021). In addition, it’s prevalent announcement in November last 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.
The risk associated with Romeo Power stock
Evidently, the past few days of trading have shown the volatility of the stock and its industry in the current market conditions. Therefore, it is important to price in the risk associated with any sharp increase in the volume of shares traded.
Written by Zac Lorschy and Tyger Fitzpatrick at Youth Investment Group
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.
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