Nikola Pops 15% In Battle To Win Back Confidence

Nikola shares jumped 15% on Wednesday as the electric truck maker issued a lengthy statement confirming that it is making progress in achieving its key business milestones in a bid to regain investor confidence.

The move comes after the stock plunged 50% over the past month amid a report published on Sept. 10 by short-seller Hindenburg Research, which accused the company of being an “intricate fraud built on dozens of lies” and of misleading investors about its business prospects. On Sept. 21, Nikola founder Trevor Milton stepped down as executive chairman of the board.

In Wednesday’s statement, which lays out its strategy to become a global leader in zero-emissions transportation, Nikola (NKLA) said that it expects the first batch of 5 prototypes of the Nikola Tre, a 100% battery-electric truck, to be completed in the next few weeks. In addition, the startup stated that it plans to begin testing production-engineered prototypes of its hydrogen fuel-cell powered semi-trucks for the medium- and long-haul trucking sectors, by the end of 2021.

Furthermore, Nikola, which has not yet produced or sold any vehicles, seeks to capitalize on opportunities to meet the need for green transport solutions.

Looking ahead investor attention will be focused on whether Nikola will succeed in closing the $2 billion deal with General Motors (GM), which was announced at the start of last month and was expected to be finalized by Wednesday. According to the deal, GM would take a 11% stake in the company as part of a partnership to build electric pickup trucks. Shares in GM closed 3% higher on Wednesday, amid a report by CNBC that the US automaker may consider snapping up a larger stake in the electric-vehicle startup.

Since Nikola, which has not yet produced or sold any vehicles, went public on June 4 via a merger with VectoIQ, the stock soared from below $15 to around $50 at the beginning of September before the fraud allegations were made. (See NKLA stock analysis on TipRanks).

J.P. Morgan analyst Paul Coster recently lowered NKLA’s price target to $41 from $45 “to reflect risk” following recent developments.

“Milton’s resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now, just as the workload is intensifying and competitive threat looms,” Coster wrote in a note to investors.

However, the analyst maintained a Buy rating on the stock as he believes that Nikola “will still execute to plan given that most developments to date have slightly exceeded our expectations, that is with the exception of Milton’s social media and marketing missteps.”

For now, NKLA has 5 analysts covering the stock, who are divided between 2 Hold ratings, 1 Sell rating and 2 Buy ratings adding up to a Hold consensus. The $37 average price target puts the upside potential in the shares at another promising 81% over the coming year.