Romeo Energy inventory went public in December 2020 via a SPAC merger with funding agency RMG Acquisition. The transfer permits Romeo Energy to cost-effectively increase funds to advertise future progress via new partnerships, investments, and R&D.
Romeo Energy Inc. (NYSE: RMO) is a Los Angeles-based startup firm who’s main in direction of a sustainable future. The corporate works primarily by offering electrical battery options for business autos. The electrical options producer was based in 2016 and has been busy increasing its attain ever since.
At present, Romeo Energy inventory is down over 50% because the firm went public final December. A number of vital occasions have led to the EV battery maker’s loss in worth.
However does that imply it’s time to surrender on Romeo Energy Inc.? Let’s take a better have a look at the components that may flip Romeo Energy’s inventory value round.
Romeo Energy Inc. Q2 Earnings Disappointment
On Aug 16, buyers noticed what Romeo Energy Inc. is able to, when the corporate launched its Q2 financial earnings. To most individuals’s shock, Romeo Energy missed its estimates, and by a comparatively giant margin.
- Missed Income – Romeo reported income of $926,000 in Q2, coming in considerably decrease than the analyst expectations of almost $3M. The drop in income is probably going as a result of the corporate continues to be within the means of scaling manufacturing. Another excuse is the global chip shortage plaguing the auto trade.
- EPS Loss – Romeo Energy inventory skilled a lack of (-0.22) per share, lacking the estimated consensus of (-0.16) per share. Once more, Romeo isn’t fairly on the manufacturing ranges analysts believed they might be presently.
- Money Reserves – Though the corporate missed its income and EPS estimates, it had $267.7 million in money and investments on the finish of the quarter.
Partially as a result of world chip scarcity affecting a number of completely different EV makers, Romeo Energy was anticipating a decline in income within the second quarter. The earnings miss was wider than the corporate had anticipated, but it surely hasn’t modified its plans going ahead.
Lastly, In Romeo’s webcast, administration famous they don’t plan on altering full-year steerage. They cited an anticipated ramp-up in manufacturing within the second half of the yr, particularly in This fall.
Romeo Energy Strategic Developments
Even with Romeo Energy Inc.’s newest hurdles, the vitality expertise firm continues to be progressing. The most recent strategic strikes place the corporate in the course of the EV motion. The next developments ought to assist the corporate ship on its expectations and enhance Romeo Energy inventory costs.
- New CEO – Probably the most vital developments is the appointment of the corporate’s new CEO, Susan Brennan. She brings in depth expertise to Romeo Energy in each the vitality and automotive industries. Earlier than becoming a member of Romeo, Brennan was the COO of Bloom Power (NYSE: BE). She additionally labored at Nissan, operating a plant with the best manufacturing output amongst automotive producers and Ford previous to that.
- Lengthy Time period Provide Settlement – On the optimistic facet of issues, Romeo Energy Inc. introduced they entered into a long-term settlement with LG Power Options to provide lithium-ion battery cells. The deal is for LG Power to supply 8 GWh price of vitality in cells to Romeo Energy. Romeo has, in return, agreed to fund the constructing of a brand new meeting line for LG Power to provide the cells.
- Testing Milestone – The EV battery maker reportedly eclipsed 750,000 testing miles of Romeo Energy modules and batteries.
- PACCAR Partnership – Romeo Energy entered right into a five-year agreement with PACCAR Inc. (NASDAQ: PCAR) to provide its battery energy packs for its business electrical car fleet. This partnership may be vital for Romeo as PACCAR is among the world’s largest producers of business vehicles.
These are all vital developments for a startup that simply went public in December. It’s plenty of info for buyers to absorb and course of. The corporate is attempting to broaden its attain and solidify its place within the electrical car market.
Battle of Battery Firms
It’s no secret that the electrical car market is rising at a fast tempo. The latest analysis hints the electrical car trade may attain almost $2.5 trillion by 2027. This displays a 33% compound annual progress charge.
Nevertheless, Romeo Energy inventory faces intense competitors within the trade, with a number of corporations combating for his or her share of the market. Only recently, one among Romeo Energy’s most vital opponents introduced a deal with LG Power to provide battery cells.
Traders may also have to think about different EV battery makers comparable to Invoice Gates backed Quantumscape (NYSE: QS). Additionally Strong Energy, which has but to go public.
Romeo Energy Inc. Inventory Forecast – Danger vs. Reward
With Romeo Energy Inc.’s inventory down over 50% because it went public, buyers my be nervous. Can Romeo Energy inventory rebound from its latest fall?
The corporate’s new CEO has substantial expertise within the auto and vitality industries, particularly when ramping up manufacturing. As administration not too long ago famous, regardless of the latest earnings miss, they nonetheless plan on assembly the 2021 targets. This may increasingly current a possibility for buyers on the lookout for an inexpensive danger vs reward setup.
Take into account, Romeo does work in a risky trade with the electrical car market set for turbulent progress. On high of this, Romeo Energy was established through a SPAC, which usually comes with further volatility by itself.
If the corporate can proceed making good partnerships and agreements, Romeo inventory buyers may be rewarded. Romeo’s progress will rely upon how nicely it might place itself within the booming electrical car market.
Electrical autos and renewable vitality are two industries anticipated to develop significantly within the years to come back. For extra on Romeo Energy inventory and the newest vitality tendencies, join our Revenue Tendencies e-letter at present!
About Pete Johnson
Pete Johnson is an skilled monetary author and content material creator who focuses on fairness analysis and derivatives. He has over ten years of non-public investing expertise. Digging via 10-Ok kinds and discovering hidden gems is his favourite pastime. When Pete isn’t researching shares or writing, yow will discover him having fun with the outside or working up a sweat exercising.