2020 has not been lacking drama. For an extra layer of spice, you can add the Nikola (NKLA) episode into the mix. Charging out of the gate after going public, the EV truck maker’s share price soared the during spring and early summer, feasting on investors’ appetite for growth stories and everything EV related.
But the story took a dark turn following a report from short seller Hindenburg Research which alleged Nikola was essentially a fraud perpetrated by founder Trevor Milton. The share price duly collapsed and the colorful headline grabbing Milton then resigned.
Nikola’s saving grace, however, is that prior to Milton’s departure it was already in advanced talks with General Motors. A deal was about to be signed in which GM would get an 11% stake in the company and in return would help build the start-up’s pick-up truck – the Badger.
Investors, however, are still none the wiser regarding the deal’s consummation. Nikola reports Q3 earnings next Monday (November 9), but with no product to sell yet, Wedbush analyst Daniel Ives stresses how clarity on the deal’s progress could impact investor sentiment and determine the next chapter in the Nikola story.
“With this linchpin EV partnership/ownership stake thrown into uncertainty post the Trevor departure and short report, investors are hoping to get some update on the progress of signing the GM deal as we head into earnings,” the 5-star analyst noted. “We believe at this point it’s all about regaining investor credibility one step at a time with next Monday another building block on that path, although clear challenges remain ahead for Nikola. Overall we still believe the company’s EV and hydrogen fuel cell ambitions are attainable in the semi-truck market, although we have serious concerns that the execution and timing of these ambitious goals stay on track over the coming years.”
Accordingly, Ives sticks to an Underperform (i.e. Sell) rating along with a $15 price target. The figure represents a 19% decline from current levels. (To watch Ives’ track record, click here)
Overall, Ives’ colleagues take a more optimistic view. Ives’ Sell is accompanied by 2 Buys and Holds, each, resulting in a Hold consensus rating. There’s a huge gap between Ives’ target and where the rest of the Street sees the share price heading – at $36.40, the average price target implies upside of 96% over the next 12 months. (See NKLA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
