General Motors on Monday announced that it has replaced its previous agreement of acquiring an equity stake in electric truck startup Nikola Corp. with a new deal on fuel-cell partnership. Shares of GM and Nikola fell 2.7% and 26.9%, respectively, on Monday.
GM (GM) signed a memorandum of understanding (MoU) with Nikola under which the US automaker will provide its Hydrotec fuel cell system for the latter’s class 7/8 semi-trucks. GM’s Doug Parks said, “Providing our Hydrotec fuel cell systems to the heavy-duty class of commercial vehicles is an important part of our growth strategy and reinforces our commitment toward an all-electric, zero-emissions future.”
The automaker stated that the new “MoU replaces the previous transaction announced Sept. 8, 2020.” Notably, under the Sep. 8 deal, GM had agreed to buy a 11% equity stake in Nikola, supply batteries, fuel cell system and a factory to build Nikola’s Badger electric pickup by 2022. The transaction was valued at approximately $2 billion at the time. (See GM stock analysis on TipRanks)
On Nov. 20, Deutsche Bank analyst Emmanuel Rosner raised GM’s price target to $48 (9.5% upside potential) from $43 and reiterated a Buy rating. Rosner is impressed with the company’s raised investment plan to accelerate the rollout of electric vehicles. Notably, on Nov. 19, GM announced a plan to invest $27 billion in electric vehicles through 2025, up from its previous announcement of $20 billion.
Like Rosner, the rest of the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 11 Buys, 1 Hold and 1 Sell. The average price target stands at $45.15 and implies upside potential of about 3% to current levels. Shares have risen by 19.8% year-to-date.
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