Investors curious about DiamondPeak Holdings (NASDAQ:DPHC) and DiamondPeak stock have lots to mull over. But the primary question comes down to whether investors believe that Lordstown Motors’ EV Endurance truck is going to be a big seller.
Several EV trucks are currently in the works from multiple manufacturers. However, none yet is focused on the same niche that Lordstown is – fleet pickups. That is this company’s defining factor.
Yes, electric vehicles are trending and gaining ground vis-a-vis internal combustion vehicles. And consumers, certainly those in the U.S who buy lots of trucks, also want a pickup truck EV option.
Further, SPACs have been a hot method by which to raise capital. All of this puts Lordstown Motors’s Endurance and DiamondPeak stock in a position to capitalize. But ultimately the question becomes if the Lordstown Endurance will sell well in its chosen vertical.
Recent Movement
An investment into DiamondPeak stock is one which will become an investment into a new stock under the Nasdaq ticker RIDE once the reverse IPO occurs later this year. Exact dates have not been released but there has been recent news on that front.
Shares of DPHC jumped roughly 10% going into the weekend of Oct. 10-11 as the companies announced plans for a meeting and vote approving the merger. The meeting will occur on Oct. 22.
Sales Potential
So, it looks highly likely that the merger will go through as planned. This is good news for investors, of course. But again, sales moves each and every company in the longer run once the technicalities of incorporation and funding pass. That’s what I want to focus on here with cautious optimism – potential sales in the medium term.
Luckily investors can make some assumptions based on news currently available. Late in September the company released news that it has received 40,000 reservations for the Endurance. The base price of the Lordstown Endurance is $52,500. The point I want to make here is that this is not guaranteed revenue by any means. That is, Lordstown investors shouldn’t expect revenues north of $2.1 billion (40,000 reservations * $52,500 base price) on the Endurance.
The vehicle deposit itself is $100, but I don’t know if it is refundable should a buyer change their mind. In the case that reservations are non-refundable, Lordstown has booked a more modest $4 million currently.
Fulfillment
If investors imagine that those 40,000 Endurance pre-orders end up becoming legitimate orders there’s the question of actual production and delivery timelines. Lordstown is anticipating beginning production in Q3 of 2021 with the goal of delivering 2,200 Endurance trucks by the end of 2021. Based on Lordstowns’ Endurance sales roadmap 40,000 units should be delivered sometime in Q1 of 2023.
The point I want to make here has nothing to do with manufacturing or any doubt regarding Lordstown Motors’ ability to produce Endurance trucks. The point I want to focus on is the current price of DPHC stock relative to the timeline of sales.
Pricing
DiamondPeak stock trades near $24 currently and has eclipsed $30 per share recently. Given that sales are forecast where they are, shares look to be priced perfectly. And the shares have also more than doubled, which is going to make the markets digest them more thoroughly which can lead to a price decrease.
Investors are right to worry that after the shine wears off following the upcoming reverse IPO that shares might fall.
Fleet Sales
The Lordstown Endurance is marketed as a fleet vehicle. As per the company’s website this is advantageous in that fleet sales circumvent complex retail sales networks. In addition fleet sales can of course be greater in volume as companies buy in bulk. The logic is clear. But before I get into questions regarding fleet sales, I’d like to also point out that individual consumers can purchase this vehicle, at least based on what I saw on Lordstowns’ pre-order page.
But back to the fleet sales strategy. Fleet sales are great from a manufacturer’s perspective. But it’s worth noting that the fleets Lordstown is looking to supplant come from Ford (NYSE:F), General Motors (NYSE:GM), and others.
These are well-heeled organizations who not only have significant resources, but also will develop their own EV trucks in the near future. GM has plans for an EV truck as does Ford.
Other Competition
I have to imagine that Lordstown is going to make a push to build out retail sales to individuals. It’s probably already happening. What this means is that the Endurance is going to be facing pickup competitors in the form of Tesla’s (NASDAQ:TSLA) Cybertruck, Rivian’s R1T, Nikola’s (NASDAQ:NKLA) Badger, and whatever EV iterations Ford, Chevy and others release.
It all spells massive competition. Despite the fleet focused sales approach it looks like the Endurance is really trying to outsell these other non-fleet EV trucks as well. Investors are really buying into this when they choose to purchase DiamondPeak stock.
DiamondPeak Stock Verdict
I would avoid DPHC shares for several reasons. First, I think it’s currently priced perfectly as a consequence of SPAC enthusiasm and EV enthusiasm. Second, I believe the other competitors are simply more competitive. And third, from a highly subjective point of view, I think consumers are going to prefer the styling of the Cybertruck, Rivian’s R1T and the Nikola Badger if that comes to market.
But my own subjective styling preferences aside, I think sales expectations and production schedules indicate that share prices ought to decline some time after the shares switch to the RIDE ticker. I also think RIDE shares could very well rise when they are placed on the market.
But that isn’t because of inherent financial fundamentals, which is why I’d stay away.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.