Controversial Trucking Company Nikola Scores Bullish Call from Wall Street
Photo Credit: Nikola
Nikola, the auto company with a $23 billion valuation and zero revenue, has won over a new bull on Wall Street. Cowen’s Jeffrey Osborne initiated coverage of Nikola with an OUTPERFORM rating and a price target of $79. Citing that revenue is about 50% fuel related, Osborne says Nikola is “more than just a truck company,” and sees it evolving into a more broad-based energy technology company. The PT is based on 2025 estimates.
“We see Nikola as an intriguing investment opportunity, leveraging one truck platform, 2 power train options and 3 business segments, with optionality in powersports, pickups and AVs.”
Cowen emphasized that Nikola’s use of strategic partners, particularly in vehicle manufacturing, will allow for a smooth production ramp.
“We are compelled by the ecosystem that the company has formulated over the past 5 years, led by Bosch (global leader in electrical systems) initially and more recently CNH/Iveco (top 5 truck OEM in Europe),” Osborne said in the note on Wednesday morning. “Nikola's internally developed IP largely lies in software/firmware, the BMS (battery management system), infotainment, aerodynamics to reduce drag coefficient and leverages partners for other critical components which derisks the ramp in our view.”
What’s fueling the business? Nikola aims to lower the cost of trucking by focusing on carbon free Class 8 trucking, vehicle electrification and hydrogen fueling. The analyst notes the business model drives about $665,000 of revenue for each truck leased. Of that revenue, Cowen estimates about 35% is truck, 50% is fuel, and 15% is service.
Nikola’s CEO Trevor Milton has been outspoken and omnipresent in the media. "Nikola's main revenue stream is the semi-trucks," according to Milton. "We can make about $750,000 or more in revenue per truck we sell, which is almost five times what our competitors make per truck. That's because we actually include all the fuel with it that we own, and we manufacture the hydrogen fuel. That's the way we make all the money."
Crowd of critics: Nikola has amassed a large group of investors willing to speculate on the company’s ability to bring a product to market, but many doubters have expressed skepticism.
ARK Invest analyst Sam Korus said he “will be surprised if Nikola ever delivers a single fuel cell truck.” While Nikola’s mission is to reduce trucking costs, ARK’s research suggests that hydrogen trucks will have a higher total cost of ownership than their battery-electric alternatives. ARK has said the infrastructure for hydrogen refueling is “an order of magnitude more expensive than charging stations for battery electric vehicles.”
Elon Musk has taken to Twitter to give his own thoughts about Nikola’s core technology, tweeting “Fuel cells=fool sells.” In another tweet, he said it was “staggeringly dumb.”
Nikola jumped to the sixth most shorted stock in the U.S., according to data from S3 Partners.
What to watch: Nikola opens up reservations for its Badger pickup truck on June 29, and new details could serve as a catalyst, according to Cowen. Known for its Semi Truck, Nikola has been hyping up its upcoming Badger pick-up truck, which the company’s CEO Trevor Milton says will rival the Ford F-150, the best selling truck in the U.S.. Milton says the vehicle will cost about $60,000 to $90,000, significantly higher than Tesla’s cybertruck. Cowen also emphasized the naming of a manufacturing partner, new fueling partners, and announcements for the mid-21 launch of the BEV Class 8 truck as key catalysts for the stock.
