The balance of calls on Nikola stock is tilting toward the upbeat side. Nikola has picked up its sixth analyst rating—a Buy from Loop Capital analyst Jeff Kauffman—giving the stock three Buys, two Neutrals, and one Sell.
Kauffman says that despite allegations that Nikola may have overhyped its technological prowess, it is a question of when, and not if, new zero-emission technologies are adopted in the coming decade. Nikola (ticker: NKLA), of course, plans to launch zero-emission heavy-duty trucks powered by batteries and hydrogen fuel cells in coming years.
Kauffman sees commercial diesel engines giving way to battery and fuel-cell technologies. “It is also not a question …whether-or-not Nikola participates in that revolution,” wrote Kauffman. “It is a question of to what degree.”
Nikola has intellectual property attractive to other industry players and possesses a first-mover advantage in fuel cells for heavy-duty applications, the analyst said. “With the shares having retreated to current levels following a series of negative publicity events, we believe the risk/reward is better balanced at these levels for new investors,” he wrote.
The negative PR Kauffman is referring to is a short seller’s report that alleges management misled investors, among other things. Nikola denies the claims, but the report, published Sept. 10, has caused the stock to drop. It has also substantially delayed a deal Nikola had struck with
GM and Nikola were to close a broad partnership on Sept. 30. GM was to take an 11% stake in Nikola, providing engineering and manufacturing support, among other things, in exchange.
The two sides are still talking, and Nikola shares are still swinging violently. Nikola stock is up about 128% since announcing plans to go public in early March. Yet the shares are down almost 40% since the report emerged.
This week, Nikola stock has risen 20%. There isn’t much news to explain the gain. Investors have been excited about a potential update regarding the GM deal—GM gave a presentation at an investor conference Thursday—but GM and Nikola have only reiterated they are still talking.
The opportunity the stock offers doesn’t depend entirely on GM, or a resolution to the short seller’s claims. Kaufmann says global sales of commercial vehicles could grow from some $600 billion currently to as much as $800 billion, giving Nikola vast room to grow.
The global passenger-car market is worth trillions each year. Cars and trucks are big business.
And zero-emission sales are set to grow. “There is an accelerating political push by countries around the world to reduce carbon footprints and transition” to clean vehicles, adds the analyst.
The EU, for instance, plans to ban new fossil-fuel powered cars by 2030. Denmark wants all vehicles that emit carbon dioxide off roads by 2040. In the U.S., California plans to phase out new fossil-fueled trucks by 2045. The goals might be difficult to meet, but they will help push adoption of EV, and fuel-cell, technologies in years to come.
With Kauffman, three analysts rate now Nikola shares Buy. The average price target among the Buy-rated analysts is about $40 a share. Two rate the stock Hold, with an average target of $23. Wedbush analyst Dan Ives rates Nikola stock at Sell. His target is $15 a share.
Write to Al Root at email@example.com