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Nikola also plans to build long-haul semitrailer trucks and a pickup truck.
Courtesy Nikola
Nikola
shares were trading lower Tuesday, after a 22% bounce on Monday following the announcement of an order for 2,500 battery-powered trucks from waste hauler
Republic Services.
Investors were hungry for customer traction, and they got it. Despite the stock giving back some of Monday’s gains, Wall Street seems impressed with the deal.
The order validates the company, Deutsche Bank analyst Emmanuel Rosner said in a Tuesday research report. He rates Nikola shares (ticker: NKLA) the equivalent of Hold, but put a “short term catalyst buy” on the stock just before Nikola reported earnings on Aug. 4.
That call looked shaky in the immediate aftermath of the report. Shares fell almost 10%—partly because there was no announcement regarding new customers for the battery-powered truck. Now the stock is trading roughly $7, or 20%, above the prevailing price when Rosner turned more positive over the short run.
Cowen analyst Jeffery Osborne was also impressed with the large order. He pointed out in a Monday research report that founder Trevor Milton used the word “guarantee,” implying it was a firm order. Nikola confirmed that the agreement with Republic is binding.
“Pricing of the order was not disclosed, but Mr. Milton said the intention was to be below [$500,000] per truck, which is the approximate price of other electric garbage truck solutions,” Osborne wrote. “The higher up front costs versus a traditional [internal combustion engine] garbage truck would then be offset by lower operation and maintenance costs over the life of the vehicle.”
Those are two positive opinions of the Nikola-Republic deal. There are only two more analysts to query. Only four cover the company.
RBC analyst Joseph Spak reviewed the deal in a quick research report Monday. J.P. Morgan analyst Paul Coster wrote that garbage trucks make sense as an EV market. “Garbage trucks follow pre-defined routes, and the fleet returns to a depot,” wrote Coster. “The trucks are typically deployed in urban/suburban environments, where noise and diesel pollution are a concern.”
Osborne and Coster rate shares Buy. Spak and Rosner rate shares Hold.
Four analysts isn’t a lot. The average company in the
Dow Jones Industrial Average
has about 30 analysts covering its shares. The average Buy-rating ratio for stocks in the Dow is about 55%.
Since a special-purpose acquisition company announced plans to merge with Nikola—which is how it became a publicly traded entity—shares are up about 275%, far better than comparable gains of the Dow and
S&P 500.
Nikola stock was down 1.7%, at $44.05 in midday trading Tuesday. The Dow was up 1%.
Republic is buying the battery-powered heavy-duty truck due in 2021.
Anheuser-Busch InBev
(BUD) is a lead customer for the fuel cell-powered heavy-duty truck due in 2023. Soon investors expect Nikola to announce a manufacturing partner for its light duty pickup called Badger. Timing for the Badger is a little more up in the air at present.
Write to Al Root at allen.root@dowjones.com