Opinions
The Panic-Proof Portfolio (Stockchase Research)
Nikola Inc.
NKLA-Q
TOP PICK
Feb 02, 2021
Stock price when the opinion was issued
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Sell, because Nikola looks like a business plan, not a business. On Tuesday, it partnered with GM to place its fuel cells and offer battery technology into GM's trucks. The market loved the deal, though the stock has pulled back since, based on a scathing short-seller report that accuses fraud, that cars using these batteries doesn't work. Nikola denies all allegations and will sue the short-seller. Why not show a vehicle that is using Nikola technology to disprove allegations? Nikola is so early in its development, so you're betting on management.
It is an example of better opportunities elsewhere. There was some shady business going on and they are still a long way from profitability. He would prefer Tesla or other automakers.
NKLA is only a $700M market cap company, even with a double in the past two weeks. It has a lot of debt, losing money, and has massively negative cash flow. Cash flow was -$625M in the last 12 months. It is going to need a lot more capital. The rally is 'probably' a short squeeze, with a 20% short interest. We can't endorse it in any way on a fundamental basis.
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Stockchase Research Editor: Michael O'Reilly With the Biden Administration already planning to make EV standard in the Federal auto fleet, this space will benefit. NKLA has a large short position against it, which could also put it into the GameStop short squeeze candidate category. They already have deals in place with GM to supply batteries and other components and NKLA plans to release a hydrogen fuel cell model in 2023. The company has increased its cash position to over $800 million over the past year. We would purchase this with a stop-loss at $13, looking to achieve $36 -- over 50% upside potential. Yield 0% (Analysts’ price target is $35.86)