What happened
Shares of electric-truck start-up Nikola (NKLA +0.00%) were higher on Monday. A Wall Street analyst initiated coverage of the company late last week with a bullish note.
As of 11:00 a.m. EST, Nikola's shares were up about 6.9% from Friday's closing price.
So what
Loop Capital analyst Jeffrey Kauffman initiated coverage of Nikola last week, rating the stock a buy and setting a $35 price target for its shares.
Kauffman wrote that the heavy-truck industry's transition from diesel to electric power over the next decade is not a question of if, but when. He said that while Nikola's founder may have "over-hyped" the company's technology leading into and after its public-market debut, the company genuinely does have intellectual property that will be attractive to partners.
Despite the well-publicized scandals surrounding Nikola, its Tre electric semi will begin shipping next year. Image source: Nikola.
Kauffman feels that with its partners' help, Nikola's heavy trucks will begin to hit the road over the next two years, notwithstanding the allegations of exaggerated technology and the departure of founder Trevor Milton in September.
Now what
While Nikola's partnership with General Motors (GM 4.54%) is still in negotiation, the company has already signed deals with industry heavyweights, including truck-maker CNH Industrial (CNHI 0.09%) and supplier Robert Bosch. Given that and the stock's recent retreat following the events that led to Milton's departure, Kauffman feels that the risk-to-reward ratio is "better balanced" for auto investors buying now.
