DiamondPeak Holdings (NASDAQ:DPHC) stock slumped 17.65% last week and is off almost 25% from its 52-week high – more than the definition of correction territory. Those data points could scare some investors off, but in reality the recent decline could be an invitation to consider DiamondPeak stock.
DiamondPeak is a special purpose acquisition company (SPAC), but it already has a deal in the works, that being electric vehicle maker Lordstown Motors.
Investors that bought DiamondPeak stock prior to the announcement of the Lordstown merger enjoyed significant benefit because seemingly everything involving electric vehicles is scorching hot these days.
As noted above, some of the air has come out of DiamondPeak stock, but this is a movie SPAC investors have seen before. The typical progression of a blank check company is trading sideways after an initial public offering, spiking on news of a merger with a target company and giving some of those gains back as short-term traders depart.
DiamondPeak’s acquisition of Lordstown was announced last month. The transaction will raise $675 million, valuing the electric pickup truck manufacturer at $1.6 billion, When the deal is complete and the SPAC goes away, Lordstown will trade under the ticker “RIDE.”
So for now, investors who want to trade Lordstown can do so with DiamondPeak because the blank check firm is now a proxy on the EV manufacturer.
Opportunities With DiamondPeak Stock
SPAC activity in the EV space is brisk this year and DiamondPeak remains an interesting idea because of Lordstown’s focus on electric trucks. It appears to be far less of a controversial idea than Nikola (NASDAQ:NKLA) and it’s not in direct competition with Workhorse (NASDAQ:WKHS) because that company is emphasizing electric delivery vans.
In fact, by way of DiamondPeak, Lordstown is a catalyst for Workhorse because the latter owns a 10% stake in the former. Lordstown, which was formed to save a GM factory in an Ohio town of the same name, has one product in the works – the Endurance pickup. Deliveries of the 600-horsepower with a 250-mile range are expected to commence in summer 2021 and the company already has 40,000 pre-orders for the vehicle.
The electric pickup market has big risk/big reward potential written all over it. Tesla (NASDAQ:TSLA) is going to be a player here, but the high-end versions of that product may be too pricey for many pickup devotees. Additionally, the Cybertruck doesn’t have the look of a traditional pickup where as the Endurance does.
If Lordstown can leverage Endurance’s more traditional look in combination with favorable pricing, it could be a viable competitor to Tesla in the electric truck market. Indeed, there’s growth to be had in this arena. The global electric pickup market was valued at just $422.5 million last year, but it’s forecast to rise to $1.9 billion by 2027.
Keys to Success
Investors looking at DiamondPeak/Lordstown with a long-term point of view need to stay abreast of several factors. First, is price tolerance. The Endurance will come with a price tag of around $52,000. That sounds expensive and it is, but there are plenty of internal combustion engine pickups on the road today with comparable price tags.
So the good news is that dedicated truck fans will pay up for a good product. Second, range is an issue that will be a factor for Lordstown shareholders. The company is forecasting a 250-mile range for the Endurance. Tesla expects higher end Cybertrucks will easily top that and Ford (NYSE:F) could get into this fray with a better number, too.
Bottom line keys to success for Lordstown are making good on the aforementioned delivery timeline, enticing customer at the $50,000-ish price point and finding a way to drive that number lower and proving to would be customers and investors that it can boost range.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.