What happened
Shares of Nikola (NKLA 2.58%) shot up as much as 10% on a turbulent day in the stock market. At 2:55 p.m. ET on Monday, the stock was still holding up well with a gain of 6.9%. That might seem surprising on a day filled with concerns that there will be a growing financial crisis after the closure of two large banks was announced in recent days.
So what
Many investors are seeking safety today, but the start-up maker of electric trucks certainly doesn't fit into that category. Nikola stock, in fact, has dropped more than 75% over the last year.
But investors always need to look ahead, and not back, and one analyst thinks there is upside in Nikola stock.
Now what
Morgan Stanley analyst Dillon Cumming initiated coverage on Nikola today, saying there was upside, but for investors to be careful. He only rated the stock a hold, but assigned a $3 price target on the shares, according to Barron's. That would represent a more than 80% gain from Friday's closing price. Cumming balanced that valuation, saying there remains much risk with the stock.
Nikola trucks. Image source: Nikola.
Two weeks ago, Nikola updated investors with its fourth-quarter results and outlook. When it started commercial production of its Tre battery-electric heavy truck in early 2022, it said it expected to sell between 300 to 500 by the end of the year. The company fell well short of that goal by producing 258 in 2022. It shipped considerably fewer than that, however, with just 20 of the 133 built in the fourth quarter delivered to dealers.
While acknowledging the progress made by Nikola last year, Cumming warned that much execution risk remained. The company plans to introduce its trucks powered by hydrogen fuel cells to the market this year. Management said it plans to deliver up to 150 of the vehicles in the fourth quarter, along with another 250 to 350 battery-electric trucks in 2023.
Even aggressive investors should probably remain skeptical of a company that has come up short of expectations several times in its short life. But if it actually does succeed with the fuel cell models, analysts like Cumming will likely come off the sidelines and rate the stock a buy. The company has a lot to prove before that happens, though.
