DiamondPeak Stock May Be the Right Stock at the Wrong Time

It’s not hard to understand why shares of DiamondPeak Holdings (NASDAQ:DPHC) are soaring. Much like marijuana stocks in 2018 and dot-com stocks back in 2000, this is the year for electric vehicle (EV) stocks. And DiamondPeak stock is the latest to see its stock go into orbit.

White chalk on pavement shows a plug-in electric vehicle.
Source: Shutterstock

My InvestorPlace colleagues have covered DiamondPeak in detail, but here’s a quick primer. If you’re familiar with how Nikola (NASDAQ:NKLA) went public, then what’s going on with DiamondPeak will sound familiar. DiamondPeak is a special purpose acquisition company (SPAC). They are conducting a reverse merger with the privately held Lordstown Motors.

Lordstown is going to market with an electric pickup truck for commercial use. The product, called the Endurance, already has 27,000 orders. And while that only requires a $100 deposit, it could lead $1.4 billion in potential revenue.

If things go according to plan, Lordstown Motors will start production late next year. And the prospect of a tangible, and apparently viable product is propelling DiamondPeak stock to just under $30 per share.

But is the stock priced for perfection? I believe it might be, but that wouldn’t be my real concern. The reason why I look at DiamondPeak with caution is, in a word, uncertainty. It appears that investors are pricing in perfection in what is a very imperfect economic climate.

A Protracted Election Result

I live by the philosophy that the knowing is better than not knowing. I believe most business owners do as well. And that’s why this presidential election is significant.

Corporations don’t care so much about who the winner is as having an election result that allows them to deal with what comes next. But it’s likely they won’t have clarity on that for several weeks after the election.

I have no idea who will win the election in November. But I’m fairly certain that we won’t know the winner on election night. In fact, I can almost guarantee it. In many states, mail-in ballots cannot be counted until election day. Based on that fact alone, ballot counting won’t be complete until several days after the election.

That means that whoever is behind on election night has no real incentive to concede the election. And for those old enough to remember the election of 2000, we may be longing for the words “hanging chad.”

Investors hate uncertainty. And so do business owners. The economic priorities of the two candidates could not be any different. Many alternative energy proponents assume that the prospects for electric vehicles will be better in a Biden administration. But that may not be the case.

The Virus Will Still Be Around

Most Americans are resigning themselves to the fact that the novel coronavirus will not magically go away after the election. Even if there is a vaccine available by the end of the year, it is not likely to be available for mass inoculation until the middle of 2021.

That means that supply chains will remain under pressure. And remember, DiamondPeak’s product is an electric pickup truck for commercial use. There is clear demand for the new trucks (at least based on preorders). Will there be consumer demand to match? And if not, will corporations follow through with their planned capital expenditures?

DiamondPeak Stock Presents an Unusual Risk/Reward Scenario

The market has shown us this year that investors want what they want. And they want EV stocks to go higher. Investors have to look no further than Tesla (NASDAQ:TSLA) and Nikola to see that. It can be easy to let fear of missing out to take over.

But part of being an investor is understanding the economic climate. The question facing EV stocks right now is not a question of if there is a market. The question is that now that there clearly is a market, are there other obstacles preventing its widespread adoption? Like many things in 2020, that is simply not clear. And that’s why I’d be wary of DiamondPeak stock at its current price.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/is-diamondpeak-stock-right-stock-wrong-time/.

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