Can Nikola (NKLA) Stock Maintain Its Upward Climb?

Nikola truck
Credit: Nikola Motors

Shares of Nikola (NKLA) have rebounded strongly over the past several weeks, surging almost 30% over the past 30 days, compared to a 1.75% rise in the S&P 500 index. And if you’ve bought and only held the stock since its 52-week low of $9.37 on April 20, you’ve made as much as 90% on your investment. But is now the time to take profits?

This surge comes as the electric truck maker, which aspires to compete with Tesla (TSLA) in the clean energy auto industry, has begun to demonstrate meaningful manufacturing progress. The company, which went public via a SPAC deal last year, announced earlier this month that it began a trial production of its battery-electric vehicle (BEV) truck. What’s more, Nikola has forecasted to deliver up to 100 vehicles by the end of the year.

This news is the latest sign that Nikola, which in Q1 reported financial results that produced no revenue, is taking the necessary strides toward becoming a legitimate player in the BEV industry. In other words, the company is finally moving away from merely a concept EV maker to a potential revenue generator. The question doubters have raised is whether that announcement alone is worth the recent 90% surge in the share price from the 52-week low. 

The company still requires tons of capital to execute its production target, not to mention the sort of production delays that is normal for manufacturers in the space. On the flip side of that argument is, in terms of manufacturing capabilities, Nikola is also making significant progress with facilities both in Arizona and Germany, which have about fourteen prototype BEVs in various stages of testing. These are important accomplishments that seemed farfetched a year ago, much less so when the founding CEO Trevor Milton was ousted.

The market is now seemingly applauding the quick turnaround of the company, which lost a lucrative partnership with General Motors (GM) and suffered from multiple self-inflicted wounds in the past. To be sure, Nikola still has a tough road ahead to overcome the many execution-related obstacles it must deal with, not to mention the increased competition, which includes established automakers such as Tesla, Toyota (TM) and Volkswagen (VWAGY), among others. But new CEO Mark Russell has done a solid job scaling back the company’s prior vision, which included several initiatives that seemed unattainable.

Russell seems to understand the company’s strengths and weaknesses in a way that wasn’t evident before. Plus, as with Tesla CEO Elon Musk, Russell may develop the same drive to want to prove the doubters wrong. Only time will tell. But all of that said, with the stock trading around $16, or some 80% below its 52-week high of $76.30, there’s more reasons to like the stock than to avoid it, especially with the company now projecting actual delivery targets.

I’m not saying Nikola will become the next Tesla. But for those who have missed the surge in Tesla for similar reasons, now could be the time to look for a bottom in Nikola.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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