Electric vehicle maker Nikola (NKLA) was once thought of as the Tesla killer. That proved to be a lot more reputation than the company merited. In fact, the company was hit by a string of disasters not too long ago.
Troubles with investors, with the government, and more, socked the company. Yet, there are some signs that Nikola may see the light at the end of the tunnel. It may, in fact, be time to buy in soon, in my opinion.
For right now, I’m staying neutral, but Nikola is increasingly becoming a company to watch.
The past year in share price started great for NKLA, as the company started 2021 at around $16. Within just a few weeks, it nearly doubled in value, making a serious play to break the $30 level.
That didn’t last, as a downward trend saw the company not only fall back to $16 but below that as well. By March 7, 2021, the company was back to just under $15. A brief recovery started, but by March 15, it was over.
By April 19, the company broke the $10 barrier, trading around $9.65. Another recovery started, and by June 1, $20 a share looked possible again. Those hopes were thoroughly dashed by the end of July.
By Mid-August, it was trading once more below the $10 mark. A recovery to $15 stepped in in early November, and was lost by Thanksgiving. The stock is now near $10 again.
Nikola’s Latest News
The latest news should help bring hope once more:
- Logistics firm USA Truck (USAK) signed a letter of intent to purchase 10 Nikola Tre trucks.
- Just before Christmas, Nikola announced a settlement agreement with the SEC in which it will pay the government $125 million in five installments over the next two years.
- Nikola also let go of a lawsuit against Tesla (TSLA), which alleged that the Tesla Semi infringed on several Nikola patents.
- A report emerged that Nikola has a big sale in the works with Heniff Transportation Systems set to buy 100 Nikola Tre trucks.
A Comeback in the Making?
Granted, Nikola looked like portfolio poison just a few months ago. With good reason, too; when the SEC is looking over your records and you’re trying to sue a much, much bigger company for patent infringement, things don’t look good for your company.
The various troubles Nikola faced ended up hobbling the partnership it was likely to share with General Motors (GM). Now, GM is increasingly competing against Nikola; GM is rolling out a new electric Chevy Silverado.
The settlement that came in a couple of weeks ago does take a lot of the teeth out of that problem, though. Nikola now can focus its efforts on getting past its “rough patch” and instead look to the future.
The good news here is that particular marketing case has plenty of support. The old CEO is gone. It’s making sales. Solid sales, too, especially when it comes to trucking firms. It’s building its own niche. This makes concerns about competition just a little less concerning.
Yes, Nikola would have had a hard time competing against Tesla and Ford (F) and all the Chinese electric vehicle makers in the field. However, since Nikola seems to be focusing on trucking firms and moving cargo, it may well have an edge.
With the somewhat-exception of Tesla, these other firms aren’t pursuing logistics firms as their primary customer. Even Tesla isn’t doing a whole lot in the logistics market. It is instead focusing on consumer-level customers like most of the rest. That’s encouraging.
If Nikola can become the electric Kenworth or Peterbilt, then getting in early might be a good plan.
Wall Street’s Take
Turning to Wall Street, Nikola has a Hold consensus rating. That’s based on four Holds assigned in the past three months. The average Nikola price target of $13.67 implies 33.2% upside potential.
Analyst price targets range from a low of $11 per share to a high of $15 per share.
Concluding Views
Nikola has not been in a great place for quite some time now. Investing here was probably a good way to spell disaster for any portfolio that tried. However, things may be turning around. The company may be getting past its earlier hurdles and may be establishing itself as a dominant niche player.
Note that I use the word “may” a lot there. That’s why I can’t be any more than neutral on this stock. There is a path forward for Nikola, and it could be quite a successful one. However, with little more than possibility backing up this bargain-priced stock, coming out in favor of it would be a step, or two, too far.
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Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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