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Nikola: Many Hurdles Must Be Cleared to Restore Credibility

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Although Nikola (NKLA) stock has periodically bounced since the headwinds started piling up last fall, it has been hard for the EV startup to shake off the bearish sentiment. The result is a share price which sits 30% into the red in 2021 and has lost as much as 73% in value over the past 12 months.

Following the pre-revenue company’s Q2 earnings, Deutsche Bank’s Emmanuel Rosner says Nikola still has much to prove to restore investor confidence. And that will be no easy task, because as Rosner notes, there are several “areas of concern” Nikola still needs to address.

For one, due to supply chain issues, management slashed its 2021 deliveries outlook “again.” And to secure components, the company is in the process of “paying up,” which could badly impact the “already-challenging economics” for Nikola’s BEV truck.

Additionally, battery cell supply for 2022 has yet to be obtained, including attempts to bring on board a second supplier. And following its customer marketing days in May, Nikola still hasn’t made any announcements regarding new Tre BEV customers.

There are some positives to note on the operational front. The Tre BEV’s trial production in Arizona has kicked off, and in Germany, the factory construction appears on track for the semi-truck’s series production to begin in 4Q21. Nikola’s sales/services network has also seen expansion, and via an investment in the WVR carbon capture project, the company has introduced a new way of procuring H2.

Nevertheless, for now, Nikola is still very much a “show-me” story, with one additional concern weighing on Rosner’s mind.

“All in all, we continue to see many execution hurdles in the near-term, which Nikola needs to clear in order to start rebuilding credibility,” the analyst summed up. “And we worry about the impact of potentially large capital raise in the near-term as the company’s plan calls for at least ~$1.5bn in additional funding before reaching breakeven.”

Accordingly, Rosner reiterated a Hold rating on NKLA shares, backed by a $15 price target. The rating might be subdued, but the figure could still generate returns of 41%. (To watch Rosner’s track record, click here)

It’s a similar story when looking at Rosner’s colleagues’ predictions for the troubled EV maker. The stock’s Hold consensus rating is based on 5 Holds vs. 1 Buy. Yet, the forecast is for one-year gains of 32%, given the average price target currently stands at $14. (See Nikola 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.