Wall Street lost interest in Nikola (NKLA) ever since fraud allegations forced founding CEO Trevor Milton to leave the company. However, the electric truck maker has quietly moved forward with business plans. After being the original EV hype stock, Nikola still trades 75% below 52-week highs, while other EV stocks are still soaring.
As EV market valuations race ahead, Nikola actually has started making progress to promote a hydrogen future moving beyond BEVs. The stock once had a wild valuation topping $30 billion, is now a potential bargain in the EV sector.
To counter the missteps of founding CEO Trevor Milton, Nikola is in the process of commissioning some BEV Tre trucks manufactured in Germany to prove the EV concept works. In addition, Nikola has made some progress towards the ultimate goal of fuel-cell EVs.
Nikola’s Director of Fuel Cells has been appointed to lead a hydrogen fueling global standardization project. Antonio Ruiz will lead an international core group of experts to implement fueling protocol standardization which will provide Nikola a leading position in the developing sector.
Nikola only has a market valuation of $9.0 billion now for a company with the promises of generating billions in sales in a few years. The FCEV truck is forecasted to provide over $1 billion in sales by 2024 and provides a differentiating factor from other competitors in the market attacking the BEV market.
The company even has a recent deal with Arizona Public Service Company to facilitate a low-cost production of hydrogen. The initial goal is to build a heavy-duty freight corridor along the I-10 freeway between Los Angeles and Phoenix.
EV Sector Races Ahead
GM has broken out in the last month to all-time highs following bullish sentiment surrounding EVs. The move comes after GM presented promising plans for EVs and self-driving cars at the virtual CES conference.
The auto manufacturing giant has proven that historical missteps won’t keep EVs down in the hot sector. Nikola only needs to prove their trucks function as promised and possibly re-establish a top customer for the company to reenter the EV rally.
As another prime EV example, Rivian Automotive just raised $2.65 billion at a market valuation of $27.6 billion. The company is working on an EV pickup to rival the Cybertruck from Tesla and is already richly valued. Ironically, GM walked away from producing the Badger pickup for Nikola.
The company is still working with GM in a non-binding deal on a global supply deal of their Hydrotec fuel cell system for Nikola’s Class 7/8 semi-trucks. The companies could easily return to the plan to make Badger trucks once Nikola establishes credibility with the new CEO and revamped BOD.
The key investor takeaway is that Nikola shareholders are currently paying for the mistakes of the founding CEO. If the company can meet targets for producing BEV and especially FCEV semi-trucks, the stock won’t be trading near the lows any longer.
Nikola has drawn optimism mixed with caution when it comes to consensus opinion among sell-side analysts. Out of 8 analysts tracked by TipRanks in the last 3 months, 3 are bullish on the stock, while 5 remain sidelined. With ~28% upside potential, the stock’s consensus target price stands at $29.29.
Disclosure: No position.
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