Shares of embattled electric-truck start-up Nikola (NASDAQ:NKLA) were moving higher in early trading on Monday, after a Wall Street analyst said that the company is likely to complete its pending partnership deal with General Motors (NYSE:GM).
As of 10 a.m. EDT, Nikola's shares were up about 5.9% from Friday's closing price.
In a note released before the markets opened on Monday, J.P. Morgan analyst Paul Coster reiterated his overweight rating on Nikola's shares and his price target of $41.
Coster wrote that Nikola's pending deal with GM, which was thrown into question following allegations that Nikola and its founder misrepresented the company's technology, is still likely to be completed -- albeit on better terms for GM.
As Coster sees it, the deal makes too much sense to abandon. Nikola needs access to GM's supply chain and engineering resources, he wrote, while GM needs to realize a return on its heavy investments in electric-vehicle batteries and (especially) hydrogen fuel cells. From GM's perspective, the analyst said, Nikola might be the best available option for adding scale to its fuel cell joint venture with Honda Motor.
As for Nikola's proposed pickup truck, the Badger, Coster thinks that Nikola's interest in the product may have waned following the departure of founder Trevor Milton, who championed the pickup truck idea. But, he wrote, it should still be of interest to GM, as a way to add scale to (and thus offset the costs of) its own electric-pickup program.
Coster believes that GM and Nikola remain "locked in dialog" and that a deal is "still seems probable." He thinks that auto investors should expect the two companies to agree on a restructured deal by the Dec. 3 deadline.