Nikola (NASDAQ:NKLA), for a while, looked like it might be the biggest Tesla (NASDAQ:TSLA) competitor in town. Troubles emerged not long after, and a slew of competitors getting in on the electric vehicle field didn't help. Recent news from the company suggests that it's not out yet, gaining 14.4% on recent news about an expanded product line.
Hydrogen Fuel Now a Good Plan
The biggest factor in Nikola's growth of late seems directly connected to a new collaborative effort with TravelCenters of America (NASDAQ:TA). The new connection calls for Nikola to start establishing hydrogen fueling stations for heavy-duty trucks in California, at two sites within the state. A small start, but a start nonetheless to what's hoped to be a nationwide network of same. Since TravelCenters of America is the largest publicly-traded company offering full-service travel centers in the US, using it as the basis for a widespread network should prove to be a smart plan.
That by itself was a big step forward, but reports note that that wasn't the only push forward. Word from Nikola board member Jeffrey Ubben noted that the company's production plans are moving forward as scheduled, with perhaps a few small hiccups. Ubben called the production plans “pretty much on target,” which suggests some variance, but not much. The company is poised to begin production on its first battery-driven semi, the Nikola Tre, in the fourth quarter in Europe followed by production in the US in 2022.
Just to round things out further, there are also signs that the company's stock is becoming more attractive in general. First, Nikola recently saw a surge in call options, with around 250% normal volume being purchased just yesterday. Normally, around 71,438 are purchased, but Thursday saw 250,036 options being purchased. There are also signs that hedge funds and similar institutions are getting more involved with Nikola; recently, SRS Capital Advisors bought an extra $31,000 of Nikola, and Winslow Evans & Crocker Inc. better than doubled its stake. Jacobi Capital Management better than tripled its stake, meanwhile, picking up an extra 332.7% back in the fourth quarter.
Somewhat Skeptical Analysts
The broader analyst pool, meanwhile, is keeping its distance, though there are signs of a bullish cant starting to swing in. Based on our latest research, the company has a consensus rating of “hold”, though the ratios comprising that hold have been changing for months.
The ratings go back to July of 2020, and back then led off with one “buy” rating and three “hold” ratings. Six months ago, that shifted to one “buy” and four “hold” ratings. Three months ago, the ratio was largely maintained as we had two “buy” ratings but also six “hold” ratings. Today, we're in the most bullish stance we've seen yet with three “buy” and six “hold” ratings. That's not especially bullish, but two-to-one hold is more bullish than three-to-one hold.
Price targets, meanwhile, occupy a surprisingly broad range. The current average is $31, with a high of $79 and a low of $13. The low is fairly recent, too, which came about earlier this week as Wedbush lowered its target from $25 to $13. The $79 price target, meanwhile, is held at Cowen from last June, which suggests it may be in line for a lowering itself.
A Market Thick With Competitors
Back when Nikola looked like the ultimate answer to Tesla, it wasn't a surprise to see it getting big valuations and big aspirations too. Now that we've got a host of Chinese companies like Li Auto (NASDAQ:LI) stepping in, as well as legacy automakers like Ford (NYSE:F) rolling out an electric Mustang, Nikola's value has dropped accordingly.
Certainly, Nikola has made some strides here. Rolling out hydrogen fueling stations does make the whole concept of hydrogen fueling more viable; what's the point of a car that runs on a comparatively clean-burning gas if there's no place to actually obtain said gas? That infrastructure will be vital to anybody who's trying to advance the hydrogen concept in vehicles. The problem in a nutshell, though, is that most electric vehicles right now seem to be focusing on the basic plug-in concept that won't be needing hydrogen. Hydrogen is likely great for Nikola's concept, but if everyone else is going with a straight plug, will there be enough value in building out the infrastructure?
It might not be a bad idea to keep some Nikola on hand just in case its business model turns out to be the one more places—and more drivers—go with. With it currently selling at $11.60, even a hundred shares is reasonably priced. Still, looking for Nikola to be the king of the electric vehicle market might be a bridge too far. With analysts calling for investors to hold their current stakes, newcomers might do well with a small stake themselves. Since Nikola's value in the market seems to depend heavily on one specific fuel source, though, it may not be quite so attractive in the long term.
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