AMZN - Amazon Order Makes Northern Genesis Acquisition a Strong Buy
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It might be time for investors to back up the truck – the electric truck, that is. That’s because special purpose acquisition company (SPAC) Northern Genesis Acquisition (NYSE:NGA) is conducting a high-profile merger with Lion Electric. But, is NGA stock worth your attention and capital?
I’ll admit, Lion Electric is the only company to electrify buses and trucks. If Lion Electric’s going to stand out in what’s likely to be an increasingly crowded field, the company really needs to prove itself.
We’ll definitely address the topic of what makes Lion Electric stand out from its industry peers. Along the way, we’ll weigh the significance of one particular partnership that could be a game changer.
With all of that in mind, let’s charge up for an electrified ride as we learn more about what might be the most interesting electric vehicle SPAC stock of 2021.
A Closer Look at NGA Stock
Back in August of last year, Northern Genesis Acquisition closed its initial public offering (IPO) of 30 million units with an offering price of $10 per unit. This resulted in gross proceeds of $300 million for the company.
$10 is not an unusual initial price for a SPAC stock, and NGA stock stayed close to that price until mid-November of 2020. Then, the stock started to climb upwards, reaching nearly $18 by the end of the year.
The momentum persisted into 2021, with the stock touching a 52-week high of $35.25 on Jan. 15.
Unfortunately, the bulls weren’t able to maintain that trajectory. They ended up coughing up some of their gains as NGA stock headed towards $15 in early March.
On the morning of March 15, the stock was fairly close to $21. Hopefully, the bulls will be able to stage a powerful comeback in March’s second half.
By the way, I should also mention that NGA stock will convert to LEV stock at some point, so be ready for that.
Pursuing a Huge Market
While perusing through the Lion Electric investor presentation, I learned quite a few notable facts.
For example, I learned that the annual total addressable North American market for medium-duty and heavy-duty urban trucks is $100 billion. Moreover, in that same region, the annual total addressable market for school buses is $10 billion.
Hence, Lion Electric is looking to consume a sizable piece of a $110 billion pie each and every year.
And importantly, President Joseph Biden’s clean-energy plan seeks to accelerate the transition of the U.S.’s 500,000-unit school-bus fleet to zero-emission vehicles, with all new sales to be zero-emission by 2030.
So, there’s a vast addressable automotive market that’s primed for electrification. Furthermore, Lion Electric is already producing vehicles to meet the demand for electrified trucks and buses. Here are a few stats on that:
- Over 200,000 square feet of dedicated operating area to manufacture the vehicles
- Annual capacity of 2,500 vehicles
- More than 400 employees across all functions
And Now, the 800-Pound Gorilla
That’s all fine and good, but Lion Electric’s appeal would be greatly enhanced if the company happened to have a powerful partner on its side.
Indeed, when it comes to value-added collaborators, Lion Electric couldn’t do much better than Amazon (NASDAQ:AMZN).
According to a filing with the U.S. Securities and Exchange Commission, Lion Electric has a deal in which Amazon (or more accurately, Amazon Logistics) is to purchase up to 2,500 Lion 6 and Lion 8 electric trucks.
Reportedly, Lion Electric will be required to reserve a portion of its manufacturing capacity from the years 2021 to 2025 for up to 500 trucks per year for Amazon Logistics.
In addition, Lion Electric will be expected to “reserve the necessary manufacturing capacity to deliver up to 500 trucks per year from 2021 to 2025 and the greater of 500 trucks per year or 10% of Lion’s manufacturing capacity from 2026 to 2030.”
For folks considering investing in Northern Genesis Acquisition shares, if a long-term deal with 800-pound gorilla Amazon doesn’t convince you, I don’t know what would.
The Bottom Line
Lion Electric’s vehicles might not be the fanciest-looking ones you’ll ever see on the roads.
Yet, the company has the capacity to produce them quickly. And, with a partner like Amazon, you probably wouldn’t want to bet against Lion Electric.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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