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Hype Asset of the Day | August 11th, 2022


Nikola Corporation (NASDAQ: NKLA)

Nikola Corporation is an American manufacturer of heavy-duty commercial battery-electric vehicles, fuel-cell electric vehicles, and energy solutions. It was founded by Trevor Milton (who was also CEO and owns 20%) and has its headquarters in Phoenix, Arizona. The corporation has two subsidiaries which are Nikola Motor Company and Nikola Energy Company. With the Inflation Reduction Act having recently been passed, Nikola Corporation has seen an increase in mentions by 125% over the last day, prompting investors to wonder what gives the company so much hype. Currently, shares of Nikola trade at only $6.62.


Positive Hype

There are plenty of reasons why it might be a good time to take a position in Nikola but here are some of the major ones.



  • Nikola announced a coming executive change that pleased investors; current Nikola Motor President Michael Lohscheller will succeed Mark Russell as CEO at the end of this year.


  • Nikola announced it will acquire electric vehicle battery pack supplier Romeo Power for a valuation of $144 million. It says the acquisition will result in annual cost savings of up to $350 million by 2026.


  • The Inflation Reduction Act was passed in the Senate, it includes a $7,500 rebate for new EVs, as well as other funding to support solutions that will help the country to achieve a 40% reduction (based on 2005 levels) in greenhouse gas emissions by 2030. Overall the legislation includes $369 billion in investments for addressing energy security and climate change all of which are beneficial for Nikola.


  • Nikola produced 50 battery electric trucks in the second quarter, delivering 48 of them and bringing in revenue of just over $18 million. The company continues to project it will deliver between 300 and 500 trucks in 2022 as it ramps up production and improves efficiencies.


  • The company said it has 56,000 reservations for the vehicle, including 5,000 preorders that required $5,000 down payments.


  • Based on those shipment targets, and a price tag of $120,000 to $150,000 per BEV truck plus service revenue, analysts believe Nikola could generate up to $115 million in revenue this year.


  • And it importantly received shareholder approval to enable an increase in its share count from 600 million to 800 million to assist with future additional capital needs.


  • On top of that potential tailwind, Nikola reported second-quarter earnings this week and beat expectations.


  • After the market closed on Friday, Deutsche Bank raised its price target on Nikola to $8 from $7.

Negative Hype

Like any other company, Nikola is not perfect. Here are a couple of reasons why it might not be the best time to buy any Nikola shares.


  • But just three months after its public debut, the SEC and the DOJ launched securities fraud investigations into Nikola and its founder and then-CEO Trevor Milton, after which Milton stepped down as its CEO and was indicted on three counts of fraud last July.


  • The company also expects to rack up a net loss of $704 million as it expands, which is a lot of red ink for a company that only held $360 million in cash and equivalents at the end of March.

Conclusion

For now, it seems like the path has been paved for Nikola Corporation to do stunningly well in the immediate future with huge potential from EV orders, new management and recent acquisitions. Although expansion does come with some losses, none seem significant enough to deter investors from taking a position in the company.





HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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