UPDATE: Cowen Starts Romeo Power Inc. (RMO) at Outperform
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Cowen analyst Gabe Daoud Jr initiates coverage on Romeo Power Inc. (NYSE: RMO) with an Outperform rating and $18 price target.
The analyst commented, "We initiate coverage on the battery tech sector with an Outperform rating on QuantumScape (QS) and Romeo Power (RMO). These two companies recently entered the public markets after merging with SPACs late last year and serve different points in the battery supply chain. QS is upstream focused, having spent over 10 years developing and patenting technologies for solid-state battery cells. We are impressed by recent test data showcasing these cells’ superior energy density, fast charge capabilities, cycle life, and safety capabilities compared to tradition lithium-ion cells and expect the company to begin generating revenue in 2024 as the technology is commercialized and manufacturing capacity is built out. As a potential buyer of QuantumScape’s cells (and other leading suppliers) Romeo is positioned further downstream with a focus on battery module and pack production for commercial vehicles. The company’s growing backlog sits at $544MM as many major OEMs have announced electrification targets for their traditionally ICE-powered trucks and buses. Romeo leverages its patented micro-welding technology and cold plate enabled thermal management design to produce packs that optimize the underlying cell technologies at scale. We forecast both companies to scale manufacturing capabilities over the coming years, enabling the electrification of vehicles to accelerate. Accordingly, we see gross margins in the 30-35% range longer-term as declining battery prices are offset by scale and premium offerings. Romeo should benefit from software-like margins, 50%+, on the roll-out of its Brain Machine Interface (BMI) offering which enables fleet managers to lower their total cost of ownership by optimizing battery usage."
Shares of Romeo Power Inc. closed at $9.68 yesterday.
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