Nikola - Don't Drop the Ball Now
Nikola, while being a promising company, is in a pivotal moment now. A young company competing with the likes of Tesla and Daimler, they have a chance to make themselves known as a true player in the electric vehicle industry.
Investment Bank Wedbush initiated coverage on the electric vehicle (EV) company on Tuesday with a Neutral rating on the controversial stock.
Despite receiving a 12-month target of $45/share and boasting a valuation of $15B, the ambivalence from many investors derives from the lack of any generated revenue as of late from the young Arizona-based company. This drought is expected to run its course through 2021, all the while Nikola burns cash at a rapid rate and competition begins to progress quickly in the electric vehicle market.
Despite not having desirable financials though, Nikola has some encouraging upside potential in its hydrogen-powered car battery. It’s quite the improvement from your typical electric motors, because while it utilizes the same functionality that makes EVs so attractive, these hydrogen-based batteries also “eliminate many of the issues that come from battery electric vehicles such as heavy duty fast fueling in minutes,” according to Wedbush’s analysis.
Overall, it’s safe to say that (much like Tesla) investor confidence isn’t a function of their respective P/E ratio, but is attributed to the trust many have in the executive team and EV team over in Arizona. There’s a reason this company has realized a $12B increase in their valuation, accompanied by one of the largest SPAC merger-IPOs in 2020.
All things considered, Nikola has a golden opportunity right now to become a "major horse in the EV Race" as the analysts over at Wedbush put it. They have the wind at their back with their hydrogen-battery approach and a handful of investors that have full confidence that this young firm will emerge as the next TSLA. We have no official opinion on the stock itself, however, Nikola management should understand that this is no time to drop the ball.
Disclaimer: At the time of publication, we have no positions in any of the securities mentioned in this article. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.