Stock Market Analysis

Will Nikola Corp’s share price surge on its first earnings call?

Nikola will report its Q2 earnings later today in what should be an important call for the EV maker which has yet to generate revenue

This article was originally published on Opto – Understand What Really Moves Markets.

Nikola Corp’s [NKLA] share price has benefitted massively from a surge in the electric vehicle sector, following rivals Nio [Nio] and Tesla [TSLA] to gain 21.6% on Monday (3 August).

However, Nikola Corp’s share price has been less than stable since its IPO in June, in which it floated for $34 in a reverse merger with VectorIQ. On its debut the share price hit and an intraday high of $38.88 before closing at $33.75.

Within less than a week, Nikola Corp’s share price peaked at $79.73 to close up 136.2% on its opening value, after recording an intraday surge to $93.99.

Following this peak, Nikola Corp’s share price lost energy throughout late June and early July before short-circuiting. On 30 July, the stock dipped to $29.06.

As the EV market again garners momentum, will Nikola Corp’s share price receive another boost through the release of its first earnings report since its IPO, later today (4 August)?

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Nikola Corp’s debut: A strong start? 

Although Nikola Corp’s recent share price performance has been unsteady, it’s worth looking at industry heavyweight, Tesla [TSLA], for some perspective.

Tesla’s share price has seen massive rallies recently, prompting even CEO Elon Musk to tweet “Wow” when Piper Sandler raised its target on Tesla to $2,322 in July.

It’s important to remember that Tesla has been on the Nasdaq for almost a decade longer, debuting on 29 June 2010 for $17 per share. Tesla raised $225m when its shares went public, whereas Nikola Corp raised almost $1bn, Barron’s notes.

Looking specifically at Tesla’s and Nikola Corp’s share prices, it took the former almost three years before the stock took off, while Nikola Corp’s share price more than doubled in its first week — albeit before a steady return towards its debut level.

Although reports in June highlighted how Nikola Corp’s market cap briefly overtook automotive industry stalwart Ford’s [F] in June, the company doesn’t expect to make any money until next year, according to CNBC.

It does, however, have plenty of ambition. Zacks highlights that the company are targeting revenues of $3.22bn by 2024, through the sale of 7,000 battery electric vehicle trucks and 5,000 fuel cell electric vehicle trucks.

Will Nikola Corp keep charging?

Nikola Corp’s share price slumped 21% on 18 July following an announcement that the firm will issue another 23.9 million shares, bringing the total of outstanding shares to 384.8 million.

Despite this, Nikola’s current share price remains depressed compared to its price in mid-June. This could prove to be a nice entry-point for investors with a bullish outlook.

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In a note in early July, Paul Coster, an analyst at JPMorgan, highlighted how Nikola Corp “is currently a story stock” and said that the firm “are on board as long as the company executes to plan, and providing the stock offers a favourable risk-reward tradeoff”, according to The Street.

Coster affirmed his share price target at $45, stating that after a 40% month-to-date decline on 7 July, Nikola Corp was beginning to look appealing to investors ahead of a “number of potential positive catalysts in coming weeks and months.”

Among four analysts offering 12-month share price forecasts, CNN Money reports a median target of $50, with a high estimate of $79 and a low of $45. The median estimate represents a 37% increase on Nikola Corp’s closing price on 3 August.

“I think Coster has the right take. Nikola Corp’s story is indeed a compelling one. But given its lack of track record, investors will need to watch carefully as the company works to execute on its aggressive business plan” – John Rosevear

“I think Coster has the right take. Nikola Corp’s story is indeed a compelling one. But given its lack of track record, investors will need to watch carefully as the company works to execute on its aggressive business plan,” John Rosevear wrote recently in The Motley Fool.

Zacks has a consensus hold rating on Nikola Corp stock, while the consensus among four analysts polled by CNN Money is to buy the stock, a rating held by two analysts, while two rate it a hold.

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