Romeo Power stock went public in December 2020 through a SPAC merger with investment firm RMG Acquisition. The move allows Romeo Power to cost-effectively raise funds to promote future growth through new partnerships, investments, and R&D.
Romeo Power Inc. (NYSE: RMO) is a Los Angeles-based startup company who’s leading towards a sustainable future. The company works primarily by providing electric battery solutions for commercial vehicles. The electric solutions manufacturer was founded in 2016 and has been busy expanding its reach ever since.
Currently, Romeo Power stock is down over 50% since the company went public last December. Several important events have led to the EV battery maker’s loss in value.
But does that mean it’s time to give up on Romeo Power Inc.? Let’s take a closer look at the factors that can turn Romeo Power’s stock price around.
Romeo Power Inc. Q2 Earnings Disappointment
On Aug 16, investors saw what Romeo Power Inc. is capable of, when the company released its Q2 financial earnings. To most people’s surprise, Romeo Power missed its estimates, and by a relatively large margin.
- Missed Revenue – Romeo reported revenue of $926,000 in Q2, coming in significantly lower than the analyst expectations of nearly $3M. The drop in revenue is likely because the company is still in the process of scaling production. Another reason is the global chip shortage plaguing the auto industry.
- EPS Loss – Romeo Power stock experienced a loss of (-0.22) per share, missing the estimated consensus of (-0.16) per share. Again, Romeo isn’t quite at the production levels analysts believed they would be at this 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.
Partially due to the global chip shortage affecting several different EV makers, Romeo Power was expecting a decline in revenue in the second quarter. The earnings miss was wider than the company had anticipated, but it hasn’t changed its plans going forward.
Finally, In Romeo’s webcast, management noted they don’t plan on changing full-year guidance. They cited an expected ramp-up in production in the second half of the year, especially in Q4.
Romeo Power Strategic Developments
Even with Romeo Power Inc.’s latest hurdles, the energy technology company is still progressing. The latest strategic moves position the company in the middle of the EV movement. The following developments should help the company deliver on its expectations and increase Romeo Power stock prices.
- New CEO – One of the most significant developments is the appointment of the company’s new CEO, Susan Brennan. She brings extensive experience to Romeo Power in both the energy and automotive industries. Before joining Romeo, Brennan was the COO of Bloom Energy (NYSE: BE). She also worked at Nissan, running a plant with the highest production output among automotive manufacturers and Ford prior to that.
- Long Term Supply Agreement – On the positive side of things, Romeo Power Inc. announced they entered into a long-term agreement with LG Energy Solutions to supply lithium-ion battery cells. The deal is for LG Energy to provide 8 GWh worth of energy in cells to Romeo Power. Romeo has, in return, agreed to fund the building of a new assembly line for LG Energy to produce the cells.
- Testing Milestone – The EV battery maker reportedly eclipsed 750,000 testing miles of Romeo Power modules and batteries.
- PACCAR Partnership – Romeo Power entered into a five-year agreement with PACCAR Inc. (NASDAQ: PCAR) to supply its battery power packs for its commercial electric vehicle fleet. This partnership can be significant for Romeo as PACCAR is one of the world’s largest manufacturers of commercial trucks.
These are all significant developments for a startup that just went public in December. It’s a lot of information for investors to take in and process. The company is trying to expand its reach and solidify its place in the electric vehicle market.
Battle of Battery Companies
It’s no secret that the electric vehicle market is growing at a rapid pace. The most recent research hints the electric vehicle industry could reach nearly $2.5 trillion by 2027. This reflects a 33% compound annual growth rate.
However, Romeo Power stock faces intense competition in the industry, with several companies fighting for their share of the market. Just recently, one of Romeo Power’s most significant competitors announced a deal with LG Energy to supply battery cells.
Investors will also have to consider other EV battery makers such as Bill Gates backed Quantumscape (NYSE: QS). Also Solid Power, which has yet to go public.
Romeo Power Inc. Stock Forecast – Risk vs. Reward
With Romeo Power Inc.’s stock down over 50% since it went public, investors my be worried. Can Romeo Power stock rebound from its recent fall?
The company’s new CEO has substantial experience in the auto and energy industries, specifically when ramping up production. As management recently noted, despite the recent earnings miss, they still plan on meeting the 2021 targets. This may present an opportunity for investors looking for a reasonable risk vs reward setup.
Keep in mind, Romeo does work in a volatile industry with the electric vehicle market set for turbulent growth. On top of this, Romeo Power was established via a SPAC, which generally comes with additional volatility on its own.
If the company can continue making smart partnerships and agreements, Romeo stock investors can be rewarded. Romeo’s growth will depend on how well it can position itself in the booming electric vehicle market.
Electric vehicles and renewable energy are two industries expected to grow considerably in the years to come. For more on Romeo Power stock and the latest energy trends, sign up for our Profit Trends e-letter today!