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Why Romeo Power Stock Is Surging Today

By John Rosevear - Apr 6, 2021 at 1:50PM

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A new deal with big-rig maker PACCAR could open the door to bigger things.

What happened

Shares of Romeo Power (RMO -3.23%), which provides electric truck battery packs, were sharply higher on Tuesday, after the company announced a new long-term deal to supply battery packs to heavy-truck giant PACCAR (PCAR -1.98%), owner of the Kenworth, Peterbilt, and DAF truck brands.

As of 1:30 p.m. EDT, Romeo Power's shares were up about 34% from Monday's closing price.

So what

Under the deal, Romeo Power will provide battery packs, modules, and battery management systems for two new battery-electric trucks from PACCAR's Peterbilt brand through 2025, the companies said in a statement on Tuesday. 

The trucks in question are the upcoming Peterbilt 579EV, an electric semi designed for short-range routes, and the mechanically related 520EV garbage truck. The 579EV will have a range of up to 150 miles, with high-density lithium iron phosphate battery packs that can be recharged in three to four hours, PACCAR said in November. 

A white Peterbilt 579EV, a traditional-looking electric semi.

PACCAR's upcoming Peterbilt 579EV is a battery-electric truck optimized for short-haul duty, with a range of about 150 miles. Image source: PACCAR.

It's not clear how much revenue this deal represents for Romeo Power. So why was Romeo Power's stock higher on Tuesday? Because PACCAR is a long-established maker of heavy trucks, and if nothing else this deal could lead to larger things as PACCAR's customers transition to zero-emissions fleets. 

Now what

The companies' announcement on Tuesday said that production of the two trucks will begin "after 2021." PACCAR had said previously that the 520EV would launch later this year, but the COVID-19 pandemic and an ongoing global shortage of automotive-grade semiconductors may have slowed the development process. 

It's also possible that a shortage of battery cells forced the delay. Romeo Power told electric-vehicle investors last week that its 2021 revenue was likely to come in below earlier estimates (between $18 million and $40 million) because of a near-term shortfall of battery cell manufacturing capacity. 

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Stocks Mentioned

Romeo Power, Inc. Stock Quote
Romeo Power, Inc.
RMO
$0.88 (-3.23%) $0.03
PACCAR Inc Stock Quote
PACCAR Inc
PCAR
$79.81 (-1.98%) $-1.61

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