Nikola Sinks Because of What Wasn’t Said on Its First Earnings Call – Barron’s

stock dropped immediately after the company reported a quarterly loss. Earnings, however, shouldnt really matter. Nikola doesnt generate any sales and the recent past for the company looks nothing like its immediate future. The companys earnings conference call was what investors needed to pay attention to. Nikola (ticker: NKLA) stock, however, didnt recover in the immediate aftermath of the conference call eithermainly because of what company management didnt say. Nikola CFO Kim Brady opened the call detailing expenses for 2020. He reviewed R&D spending as well as future spending on equipment and personnel.
But Nikola management didnt announce any customers for the battery-powered electric truck, due in 2021. (Nikolas battery-powered heavy-duty truck will be released before the fuel cell-powered version.) They didnt announce a manufacturing partner for the Badger light pickup truck. They didnt provide a firm Badger reservation number either. And management didnt announce any partnerships for hydrogen filling station construction.
There wasnt a lot for investors to dig into.
Is this all we get, JPMorgan analyst Paul Coster joked with management early in the Q&A session, following managements prepared remarks.
You have to trust us, Nikola CEO Mark Russell quipped. He says there is more going on than what is contained in news releases. But, Russell prefers to keep things confidential for now.
Nikola bulls will likely view the call as a bit of a letdown. Nikola stock started down about 4.7% in after-hours trading. Losses reached about 12% by 5:30 p.m. Eastern time.
Deutsche Bank analyst Emmanuel Rosner asked about the cost of electricity for hydrogen production. Electricity is the key input for Nikolas hydrogen production process. Management did say something interesting in response to that query.
We can make hydrogen for a decimal point move, said Russell. His point: 3.5 cent per kilowatt-hour, or kWh, electricity costs can equal $3.50 per kilogram hydrogen gas cost. $3 to $4 per kilogram hydrogen will make Nikola fuel cell trucks competitive with diesel, excluding any environmental benefits.
The cost of hydrogen is a big deal for Nikola stock in the long run.
Thats a good data point for investors to file away. Now investors have to decide whether electricity can be had for below 4 cents kWh.
Investors can expect analysts–all four of them–to weigh in on results in Wednesday research reports. That could swing the stock further. Two of the analysts rate the stock Buy, two rate it Hold. The average analyst price target is $56, above where shares trade, but price targets will also change after the companys first quarterly report.
Year to date, as of Tuesdays closing price, Nikola stock is up about 278%, better than comparable returns of the
S&P 500
Dow Jones Industrial Average.
But the stock has been volatile, and shares are down roughly 30% over the past month.
Volatility might be the name of the game as long as Nikola prefers to keep its secrets to itself.
Write to Al Root at

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