Why EV startup Nikola’s stock soared 19 percent
The EV startup confirmed it began production of its first electric semi-trucks, with deliveries slated to begin in the second quarter. After a year of problems, is it worth a look from investors?
Shares of Arizona-based electric vehicle (EV) maker Nikola (NKLA) surged as much as 19% Thursday on news that it had begun production of its first electrified semi-truck.
The stock closed Wednesday at $9.02 and jumped to a two-month high of $10.90 during the early minutes of Thursday’s trading session before fading lower. Nikola stock was trading at $9.78 per share at the time of this writing Thursday morning.
Shares of several EV companies have been trading higher over the past month, as rising oil prices and prices at the gas pump spotlight the rapidly growing sector and make electric vehicles more attractive.
Nikola is still working to repair its reputation after facing federal investigations and allegations of fraud last year. Like many young EV companies, its stock has struggled and it remains down more than 30% in the past 12 months.
At its “Analyst Day Presentation” on Wednesday, Nikola reported that production of its Tre BEV electric truck began Monday, March 21, and that US deliveries are slated to begin in the second quarter of 2022.
The Nikola Tre BEV is a battery-electric semi-truck that is aiming to serve the short-to-medium haul needs of customers throughout the US and Europe. The truck has a 350-mile range and takes approximately 100 minutes to charge. According to Nikola, competitor semi-trucks average “only” approximately 200 miles per charge.
Nikola expects its Tre BEV to be among the first commercially available zero-emission trucks to the market, beating even Tesla’s (TSLA) semi-truck. Tesla had reportedly delayed production of its semi until 2023.
Nikola said it expects to deliver between 300 and 500 Tre BEVs in 2022.
Nikola made its first pre-series Tre BEV deliveries in the fourth quarter of 2021, and full production will begin next quarter. The company produced 40 pre-series Tre BEVs, of which 18 have been completed and delivered to date and another 22 are awaiting final checks and commissioning before delivery.
Looking at the company’s total production capabilities, Nikola said its Coolidge, Arizona, plant is currently capable of producing approximately 2,400 BEV and FCEV units. Its FCEV vehicles are powered by hydrogen fuel cells. Nikola expects to reach 20,000 units by the first quarter of 2023 and roughly 45,000 units per year by 2024.
Nikola has a second plant in Ulm, Germany, with an expected capacity of around 2,000 BEV and FCEV units per year to start with the potential of producing up to 10,000 units annually. Production of the Tre BEV for the European market will begin here in June 2023.
The company’s other models, Tre FCEV and Two FCEV semi-trucks, are expected to be available in 2023 and 2024, respectively. The Tre FCEV is a medium-haul semi with a range of up to 500 miles per charge, while the Two FCEV is a long-haul/sleeper semi with a range of up to 900 miles.
Allegations of fraud threaten EV startups reputation
Last year, Nikola founder Trevor Milton resigned from his position as chairman after the US Securities and Exchange Commission (SEC) and Department of Justice (DoJ) began investigating claims that Milton and Nikola committed securities fraud.
Milton was indicted by federal prosecutors in July 2021 on three counts of securities and wire fraud. The DoJ alleged that Milton defrauded and misled investors about the development of Nikola products and technology. Milton has since been released on $100 million bail, and a trial date has reportedly been set for sometime in mid-2022.
Nikola has been trying to distance itself from Milton ever since. In December 2021, Nikola settled with the SEC and agreed to pay a $125 million civil penalty to resolve fraud charges. Payments began in December and will consist of five installments over two years. Nikola said that it had taken a $125 million reserve in its third quarter earnings to account for the expected settlement.
The company neither admitted nor denied the SEC’s findings.
Thinking of buying Nikola stock?
Nikola went public in June 2020 by merging with special purpose acquisition company (SPAC), VectoIQ Acquisition, and the stock has been on a wild ride ever since.
Shares of Nikola opened on June 4, 2020 at $37.55 and soared 155% in the first few days of trading to an all-time high of $93.99. It’s now down 90% from this high.
For a five-year view of the performance of this stock, see the graph in our dedicated guide.
Most recently, Nikola reported a narrower-than-expected loss when it reported its fourth-quarter and full-year 2021 financials in February. It reported an operating loss of $90.4 million, or $0.23 per share, compared to Wall Street’s expectations of a loss of $0.46 per share.
The company also confirmed its revenue expectations for 2022, projecting it will generate revenue of between $90 million and $150 million in 2022 on deliveries of between 300 and 500 Tre BEV semi-trucks. Wall Street is estimating revenue of between $75.6 million and $123.6 million for 2022.
Analysts currently give the stock a Hold and a $12.88 12-month average price target. But Nikola surely faces an uphill battle to restore its reputation as it tries to ramp up vehicle production amid global supply chain shortages.
As of March 2022, Nikola has letters of intent (LOI) and memorandums of understanding (MOU) to purchase up to 425 Tre BEVs with deliveries slated for 2022. It also has LOIs from several companies to purchase up to 210 FCEVs and is under contract with Anheuser-Busch to deliver 800 FCEVs beginning in 2023.
Nikola stock is up 18% over the past month, which could be a sign things are turning around. The company’s confirmation this week that vehicles will in fact be coming to market may be the reassurance investors needed to get behind this EV startup.
At the time of publication, Matt Miczulski did not own shares of any equity mentioned in this story.
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