Today we have, maybe, the most speculative idea of all, what came to my mind: take shares of Nikola electric startup (NASDAQ: NKLA), to capitalize on their rebound after a fall.
Growth potential and validity: 34% behind 16 Months; 150% behind 5 years; 347% behind 10 years.
Why stocks can go up: they fell hard, but it's very likely, that the company will receive support from over.
How do we act: take now 11,18 $.
What the company makes money on
On nothing, Nikola still has no revenue. She designs trucks, who will ride on the power of electricity and hydrogen, as well as a network of gas stations, where hydrogen transport will refuel. Company report is useless: production will start sometime in 2022-2024.
In its origin, Nikola is a SPAC. What it is, read in longride, because it is important for our history.
Arguments in favor of the company
Fell down. The company's shares have fallen heavily over the past year due to allegations of fraud - on 77,66% from the peak in September 2020. And recently, company founder Trevor Milton was formally charged with defrauding shareholders..
The stock is currently trading lower. 13 $ - prices, asked for shares in the original SPAC following the news that, that he will merge with Nikola. I think, that given the points below, we can pick stocks now in anticipation of a rebound. But even without the factors listed below, there is a good potential for a rebound. From my experience I can guess, that the average investor may well start investing in a company's stock simply because, that “well, there they are at annual lows already, need to pick up ". There are a lot of such investors, and at their expense, fallen shares can rise simply because, that they recently fell heavily.
Ashes of Lordstown knocking in their motor. With current EV sales growth forecasts, as well as large-scale investments and goals in the field of hydrogen transport, Nikola shares may well rebound. This, probably, will happen due to the speculative influx of large and not very large investors in them, mainly on the basis of ideology.
In the latest issue of investment news, there was a talk about, how defunct electric pickup maker Lordstown Motors was rescued against all logic. They can also save Nikola. Just because, that Nikola, despite allegations of fraud, sets very ambitious goals and makes a significant contribution to popularizing the process of transferring transport to clean energy sources. This is the most important argument in defense of Nikola, considering the capabilities and goals of the powerful ESG lobby.
Certainly, Nikola can be allowed to die ingloriously, but the effect of this can be extremely painful for all companies, dealing with clean transport. After all, in this case, investors will begin to treat projects in this area much more legibly., and this will greatly slow down the flow of money into this area. The bottom line is completely disheartening: the whole situation can derail plans to transfer transport to clean energy sources. Unlikely, what will it be allowed, Considering, how much money and effort has already been invested in the promotion of environmentally friendly transport. For example, multibillion-dollar incentives for the purchase of electric cars and pumping the capitalization of the respective companies.
So I think, that Nikola will be saved without regard to the truth in several ways.
Firstly, regulators and the court may be inexplicably soft on Milton. This is unlikely, because the case went to court, and Milton himself was released on bail for an astronomical sum 100 million dollars. However, it's not so terrible, because he no longer holds a management position in the company, although he still has 20% Shares. And although the charges against Milton are quite serious, they, in fact, belong to that period., when he, presumably, deceived investors at the initial stage of the company's development.
So that, even if his guilt is proven, by and large for the company it will not mean so much, although stocks are likely to fall simply due to reputational damage. After all, the company is not accused of anything, the only scapegoat here is Milton. But still there is a possibility, that Milton will have influential defenders, like Elon Musk, who also had problems with the law, — and Musk miraculously solved them.
Secondly, Nikola shares will start buying ESG funds, to create confidence in the market, that “clean transportation is still cool”, and maintain the investment attractiveness of the sector as a whole. This is a more realistic option., and it seems to me the most likely. The current management of Nikola will try to clean up its reputation a little in the near future and present some achievements., which will have to attract investors into the shares.
Can buy. The company can be bought, or she can become a partner of a large car manufacturer. Similar projects are being implemented by Daimler, Hyliion, Hyundai, Lion, Tesla, Toyota and Volvo - Nikola could be bought by one of them for its existing R&D results. Or Nikola can at least partner with one of them., which will give its shares respectability.
Once upon a time, General Motors should have become such a partner., but after the first allegations of fraud, she was quick to distance herself from Nikola, entering into only a very limited agreement with the company and refusing to buy a large stake in it.
However, This does not mean, that there will be no new partners. Whether Milton cheated investors or not, Nikola is really working on his trucks now., And, may be, she has something to offer a potential partner or buyer.
Understandably, that all these premises are rather shaky, but in this case, you can try to take a chance. The company's capitalization is only 4,42 billion dollars, it will be easy to pump up her quotes. So we, probably, we will be able to achieve our goals, even if sometime in the indefinite future the company goes bankrupt.
This idea is not meaningless. Nikola will make cars for cargo transportation, which is not so unreasonable from the point of view of the conjuncture. Practice shows, that business owners in developed countries are already sufficiently indoctrinated by the ESG ideology, and who was not indoctrinated - they will force them through the court, как Exxon.
Private consumers still need to be convinced, that they need an electric car, but it is easy for company owners to “promote” or even simply force them to buy environmentally friendly vehicles.
This does not mean, that Nikola can become profitable, but potentially there is a lot of room for growth in its revenue, because the market for selling trucks and refueling services is hundreds of billions of dollars. Yes, and it will be easy to grow this revenue, because it will grow from zero, now there is no revenue. Due to the low base effect, Nikola will look very cool in the eyes of investors in the first time after the launch of commercial operations..
What can get in the way
Your claims are at risk. Milton faced a whole list of charges, but, given their detail and the dubious history of Milton's pre-Nikola ventures, probably, prosecution right. If Milton is convicted, then stocks can fall hard, but it's not that important, as that fact, that the company looks rather crude.
Nikola has repeatedly reduced plans for the production of cars and may reduce them and postpone the start of production again and again - with extremely negative consequences for quotes. Because of this, stocks may fall again by 5-6. For a losing company, who doesn't even have income., any price can be justified.
Also, do not exclude new revelations about the real state of affairs in the company.: may come to light, that the company has no significant achievements. Yes, you too, who has already ordered trucks from her for the future, can cancel orders against the backdrop of all this news - which can deal a death blow to the company.
Other problems. The company may not live to see the production of cars for other objective reasons - for example, will come to light, that she doesn't have enough money. Or there will be other unknown production problems. The company does not sell anything, and incomprehensible, When will she make a profit?. May be, she will never be. And given the proximity of raising rates, rising cost of loans and the company's dubious reputation, it will become more difficult for her to borrow money to finance operations. A damaged reputation at least guarantees additional volatility to quotes.
The idea itself is speculative. Our initial assumptions here are extremely speculative.. There is no question of the quality of the business, we focus on the possible perception of the company by investors. May be, Nobody will save Nikola, and instead, investors and rescuers will sponsor a dozen more “promising start-ups”, whose leadership will also lie to everyone.
What's the bottom line?
We take shares now by 11,18 $. And then there are three ways:
- wait 15 $, who asked for these shares back in the first half of July. It seems to me, that we can reach this mark in the next 16 Months;
- you can wait for the return of the company's shares to the mark 28 $ - price in January of this year. There are waiting times, probably, will be about 5 years. If, certainly, the company will live so long;
- squint and keep stock following 10 years and wait for the price 50 $. If during this period the company achieves its goals, then in theory it will be able to reach the previous historical maximum, like in september 2020. And all this thanks to the influx of investors, who will be delighted with the proof, that the company is not fake.
But this is a wildly speculative idea., so you can only invest in these stocks that money, which you would burn in the oven. You need to be mentally prepared, that tomorrow the company will declare bankruptcy.
