Electric vehicle startup company Nikola, which listed last year through the SPAC (special purpose acquisition company) route, releases its fourth-quarter earnings today after the close of markets. Here’s what you need to watch for in the release and our forecast on where the shares will head next
Nikola hasn’t yet started delivering its vehicles, therefore it is not making any meaningful revenues. However, we still need to keep an eye on the company’s progress on the bottomline. It posted a net loss of $117 million in the third quarter of 2020. Analysts polled by TIKR expect the company to post a net loss of $96 million in the fourth quarter of 2020.
Nikola’s earnings estimates
Analysts see Nikola posting revenues of $62 million in 2021. Notably, the company expects to start delivering its trucks in 2021, which should begin to be reflected in its topline performance.
Meanwhile, in the absence of any current revenues, we will need to monitor the company’s performance based on its production timeline, as a company statement confirmed: “Nikola believes the best way to evaluate its results is to monitor the Company’s progress toward achieving its milestones.”
What else to watch in Nikola’s fourth-quarter earnings report
During Nikola’s fourth-quarter earnings call, markets will be watching out for more details on the company’s partnership with General Motors. While General Motors announced a partnership with Nikola last year, it was scaled back after Hindenburg Research’s allegations that accused Nikola and its founder Trevor Milton of fraud.
Hindenburg also took a swipe at Nikola’s partnership with General Motors, saying at the time, “Nikola’s partnership with General Motors that was announced earlier this week, the report said that Trevor “has inked partnerships with some of the top auto companies in the world, all desperate to catch up to Tesla and to harness the EV wave.”
While Nikola denied the claims by Hindenburg, markets were not impressed and the company’s shares tumbled. Eventually, Milton had to quit Nikola. More recently, Hindenburg has accused Chamath Palihapitiya and Clover Health of hiding material facts from investors. The SEC is probing the claims and that led to a fall in Clover Health stock as well as other Palihapitiya’s SPAC.
Its execution time for Nikola
Last year was a dramatic one for Nikola. At its peak, the stock’s market capitalisation was above that of Ford. However, it fell sharply after Hindenburg’s allegations. But analysts now seem to be warming up to the company.
JP Morgan issued a positive note in January. Analyst Paul Coster expects 2021 “to be less drama-filled and to turn generally positive” for Nikola. Coster expects 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.” He expects Nikola to have “at least nine trucks for testing by end of the 1Q21.”
Analyst forecasts: Dan Ives also turns positive on Nikola
More recently, analyst Dan Ives of Wedbush Securities has also turned bullish in his forecasts for Nikola shares. While he pointed to “lingering concerns” over execution, Ives said, “We still believe the company’s EV and hydrogen fuel cell ambitions are attainable in the semi-truck market.” He upgraded Nikola shares from underperform to neutral and raised his target price from $15 to $25.
Earlier this week, the company provided details about its North American hydrogen fuel-cell electric vehicle commercial truck program. It said that its portfolio has three trucks that include:
- Nikola Tre BEV (battery electric vehicle) Cabover which has a range of 300 miles
- Nikola Tre FCEV (fuel cell electric vehicle) with a range of up to 500 miles
- Nikola Two FCEV Sleeper with a range of up to 900 miles
During the company’s earnings call, markets will watch out for more details about these vehicles. It is also worth noting that execution can be a big challenge for electric vehicle companies – Tesla went through what its CEO Elon Musk calls “manufacturing hell.”
Can Nikola repeat the success of Tesla and NIO?
NIO also survived a bankruptcy scare in 2020. However, the company not only managed to fend off survival threats but also saw its share price gain more than 1,100% in 2020; Tesla gained 740% last year. However, both these shares have been under pressure this year as markets are becoming concerned over the valuation.
However, Nikola shares have gained 38% so far in 2021 and are outperforming most electric vehicle stocks as well as the S&P 500. Some investors are clearly seeing value in the beaten-down Nikola shares. The shares have a 52-week trading range of $10.34 to $93.99. Based on current prices, Nikola is trading at less than a quarter of its 52-week high prices.
For Nikola, the key could be execution this year. The company has to justify its reputation as the “Tesla of trucking” with effective execution. The fourth-quarter 2020 earnings call is an opportunity for the company to justify the recent surge in its share price.
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