Tesla might have posted some serious gains this year – shares are up by 139% - but it has nothing on fellow EV maker Nikola (NKLA).
Shares of the electric heavy-truck maker have been on a turbo charged run up, gaining 624% since the turn of the year.
But is the hype justified? After all, for a company not generating any revenue – and one that despite this basic prerequisite is currently valued higher than Ford - the price tag seems, well, too high.
At least that is the view of J.P. Morgan analyst Paul Coster. Coster initiated coverage of Nikola with a Neutral rating and a $45 price target, which implies a downside of a hefty 39% from current levels. (To watch Coster’s track record, click here)
That’s not to say Coster rejects Nikola’s proposition. However, laying out the reasoning behind his review, Coster said, “NKLA is poised to disrupt the transportation industry with rapid deployment of hydrogen infrastructure and FCEV powered vehicles for use on long haul trucking routes, reducing CO2 emissions meaningfully and positioning the firm for a key role in the future hydrogen economy. The resulting business model could be compelling, however risks are elevated for this pre-revenue company, and the stock looks fully valued here, so we look for a pull-back or incremental positive developments to get more constructive.”
That said, Coster gets Nikola’s appeal. Calling Nikola “a Hydrogen economy pure-play,” the secular clean energy trend could be a strong tailwind over the next few years. The disruptor is eying a $600 billion TAM (total addressable market), and could potentially bring in “over $10 billion p.a. in Truck revenues within a decade.”
Add to that an impressive list of manufacturing partners, which includes CNH Industrial, Bosch and Nel, and a speedy pathway to market is in the cards. Customers, according to the company, are also lining up, with 14,000 truck reservations in place.
However, eventually it all leads back to the “fully valued” share price, which Coster notes “trades on very high multiples of distant-future revenue and EBITDA.”
In terms of other analyst activity, it has been relatively quiet. Overall, 1 Buy rating and 1 Hold assigned in the last three months add up to a ‘Moderate Buy’ analyst consensus. Meanwhile. the $62 average price target implies a 16.5% downside from current levels. (See Nikola stock-price forecast on TipRanks)
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