What happened
Shares of Canadian electric bus maker GreenPower Motor (GP 1.21%) were trading higher on Friday. The company said on Thursday that it has entered into a deal to supply recreational-vehicle maker Forest River with up to 150 battery-electric chassis -- and possibly, many more over time.
As of 1:30 p.m. EST, GreenPower Motor's stock was up about 9.3% from Thursday's closing price.
So what
GreenPower agreed to supply Forest River with "up to" 150 so-called chassis-cab versions of its EV Star, a battery-electric shuttle bus. A chassis-cab includes the passenger cabin and front end, but the remainder of the chassis is left bare -- in this case, because Forest River is going to build motorhomes on them.
GreenPower's EV Star. Image source: GreenPower Motors.
Forest River, owned by Berkshire Hathaway, will use the GreenPower chassis to launch a new line of zero-emission recreational vehicles. Initial volumes will be very small: GreenPower said it expects to deliver the first six units this quarter, with the remainder to follow over the next three years at a run rate that the partners will figure out by the end of September. But depending on how well they sell -- and presumably, on how well GreenPower holds up its end of the deal -- this could turn into a significant longer-term supply contract. That's why the stock was moving higher on Friday.
Now what
Wall Street likes the deal. B. Riley Securities analyst Christopher Souther reiterated his previous buy rating on GreenPower's shares and raised his price target to $38 from $35, saying that Forest River could in time become a very large customer for GreenPower.
BTIG analyst Gregory Lewis had a similar view. Lewis also maintained his previous buy rating on GreenPower and also raised his price target, in this case to $40 from $25. He thinks auto investors should note that while COVID-19 issues have weighed on demand from GreenPower's traditional customers (like airports), the company is successfully generating increasing demand via its sales channels.
