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Nikola: Less Drama, More Execution Expected in 2021, Says J.P. Morgan

·3 min read

Drama, drama and more drama; That sums up 2020 pretty well. It could also perfectly describe Nikola’s (NKLA) first year as a publicly traded company. There have been highs, as the EV truck maker’s stock soared initially due to investors buying in to the promising growth story, followed by crashing lows. These included allegations of fraud by the company’s founder and his subsequent resignation and disappointing or altogether cancelled deals. Not to mention, the share price falling off a cliff.

However, heading into 2021, J.P. Morgan analyst Paul Coster expects the Nikola news flow “to be less drama-filled and to turn generally positive.”

Nikola shares have come under pressure from several fronts, part of the price collapse was due to an abandoned partnership with waste collection company Republic Services, in addition to a severely pared back relationship with General Motors. However, Coster urges investors to look at the bright sides.

“Both partnerships were hastily thrown together by the founder, and committed NKLA resources to non-strategic initiatives,” Coster said. “We believe Nikola was prudent to exit these arrangements, preserving cash for execution of the Class 8 truck initiative.”

There are other catalysts to look forward to, according to the analyst. Two Nikola Tre's are now at the Arizona plant, one has been commissioned and is “meeting expectations.”

The Tre remains on schedule to hit the market by the end of next year, and the company anticipates it will have “at least nine trucks for testing by end of the 1Q21.” Coster expects videos of a functioning Tre to be posted as early as next month.

The analyst looks forward to a “steady flow of updates for the truck in 2021, as test milestones are met, as production ramps in Ulm, and as customers submit orders in midyear.”

Further down the line, an announcement of a fuel station partner should be anticipated for 2H21 and plans for the FCEV truck are expected to “come back into focus” later in the year.

All in all, Coster rates NKLA an Overweight (i.e. Buy), but cuts his price target from $40 to $35. Nevertheless, investors could be pocketing gains of a massive 137%, should Coster’s thesis play out over the next 12 months. (To watch Coster’s track record, click here)

There’s plenty of upside for Nikola, according to Coster’s colleagues, too. While not quite as bullish, the $26.67 average price target suggests upside of 80% in the year ahead. Overall, the stock has a Moderate Buy consensus rating, based on 3 Buys, 4 Holds and 1 Sell. (See NKLA stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.