If clean-energy big rig manufacturer Nikola (NASDAQ:NKLA) has taught eager investors one thing, it’s that what goes up, must come down. Unfortunately, some ill-timed NKLA stock traders had to learn this lesson the hard way.
It seems like yesterday that Nikola was a darling among special purpose acquisition company (SPAC) fanatics and electric vehicle market traders.
However, as the hype phase gave way to the reality-sets-in stage, the NKLA stock price tumbled and legions of bag holders lost their enthusiasm for Nikola.
So, where does Nikola stand today? Let’s just say it’s a “good news, bad news” situation – and the future’s as opaque as it’s ever been for this controversial electric vehicle maker.
A Closer Look at NKLA Stock
It’s been almost exactly 12 months since NKLA stock topped out in the $90’s. That happened in the summer of 2020, a heady time for electric vehicle SPAC stock traders.
In 2021, I wouldn’t hold your breath waiting for Nikola shares to hit $90 again. Instead, we need to have more realistic goals in mind.
The price action of the past month could provide some clues, and some encouragement.
NKLA stock appears to have bottomed out at about $9 on April 20. As of June 4, the share price settled at approximately $17.
That’s a pretty good improvement, and it signals a potential bottoming process. The next resistance point could be $28, which is the short-term top reached in late January.
Ups and Downs
Over the past year, Nikola’s stakeholders have been through a roller-coaster ride of positive and negative events.
I won’t even delve into the scandals involving founder Trevor Milton, the Nikola truck allegedly rolling down a hill in a promotional video, and so on.
Lately, as we’ll see, there’s been a mixed bag of developments for Nikola. I’ll start off with some positive ones.
In May, Nikola signed a letter of intent (LOI) with Total Transportation Services. Apparently, the two companies will collaborate to accelerate the use of zero-emission trucks at the port of Los Angeles/Long Beach.
The partnership will result in the trial of the Nikola Tre BEV (battery-electric vehicle) as an alternative mode of transportation at the aforementioned port.
It’s a signal event for Nikola, as Total Transportation Services could end up purchasing 100 Nikola Class 8 battery-electric vehicles.
For his part, BTIG analyst Gregory Lewis recommends that investors should keep an eye on Nikola’s “dual-pronged strategy of helping transition the heavy-duty Class 8 truck market to battery-electric trucks (BETs) and hydrogen fuel cells (FCEV).”
And with that, Lewis assigned a “buy” rating along with an $18 price target on NKLA stock.
The Nikola bulls will also undoubtedly point to the company’s recent earnings report as a positive catalyst.
For the first quarter of 2021, Nikola reported a loss of 14 cents per share. At first glance, that might not sound like something to celebrate.
However, Wall Street analysts were expecting no quarterly sales (and indeed, there were none) and a loss of around 27 cents.
Thus, we have a narrower-than-expected quarterly earnings loss. It’s not much to get excited about, but it’s something.
Moreover, Nikola spent approximately $120 million developing its trucking programs. That’s less than the roughly $140 million that analysts were projecting.
On the other hand, investors can’t ignore Nikola’s announcement of a new inquiry being conducted by the U.S. Securities and Exchange Commission (SEC).
Reportedly, the company received a subpoena from the Division of Enforcement. This subpoena, moreover, was related to Nikola’s projected 2021 cash flow and anticipated use of funds from 2021 capital raises.
This, to be frank, is the last thing that Nikola’s stakeholders need right now. SEC probes can drag on for quite a while.
Therefore, this is a time to be cautious, not overenthusiastic, on Nikola.
The Bottom Line
It’s challenging to try to predict where NKLA stock will go next. It seems to be on an uptrend in the short term, but that could fizzle out at any moment.
For the time being, it’s best to sit on the sidelines and monitor the SEC’s new inquiry into Nikola. Caution, not hype, is the right emotion, right now.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
NKLA shares rose $0.01 (+0.06%) in after-hours trading Monday. Year-to-date, NKLA has gained 15.66%, versus a 13.29% rise in the benchmark S&P 500 index during the same period.
About the Author: David Moadel
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. More…