What happened
Shares of electric-truck start-up Nikola (NKLA -2.41%) are trading lower on Tuesday morning since a key Wall Street analyst gave the stock a mixed review in a new note.
As of 10:30 a.m. EDT, Nikola's shares are down about 10.8% from Monday's closing price.
So what
In a note on Tuesday morning, RBC auto analyst Joseph Spak initiated coverage on Nikola with the equivalent of a hold rating and a price target of $46.
Spak's take on Nikola is a mixed one. On the one hand, its plan to offer hydrogen fuel-cell trucks in a lease package that includes refueling at Nikola-owned stations is a promising one that could spur wider adoption, Spak wrote, helping Nikola capture more of the trucking value chain.
Nikola hopes to begin producing its electric big rigs by the end of 2021. Image source: Nikola.
But on the other hand, right now, Nikola is more like a business plan than like a business. The company has no revenue and won't until late next year at the earliest, and its technology -- lower-cost fuel cells and breakthrough battery chemistry -- has yet to be tested in the real world.
Spak's price target is based on his estimates of Nikola's sales and earnings in 2028, discounted at a rate of 15%.
Now what
I think Spak's take is a fair one. Nikola has genuinely promising technology, real partners, and an intriguing business plan -- but it also has yet to show auto investors that it can execute that plan.
Nikola has promised to reveal more details on its products, including its much-talked-about Badger pickup, at an event in Phoenix in early December. But investors won't have to wait that long for an update on the company's progress: It'll make its first quarterly earnings report as a public company sometime in the next few weeks.
