Nikola’s Improved Reputation and Positive Catalysts Should Lift Its Stock

With Wall Street now realizing that Nikola’s (NASDAQ:NKLA) death was greatly exaggerated — and with the hydrogen revolution likely to continue advancing — I remain bullish on NKLA stock.

Moreover, there’s a chance that Nikola could partner or even merge with Plug Power (NASDAQ:PLUG).

If the companies do partner or merge, they would become hydrogen superpowers. Ultimately, that would greatly boost the profits of their shareholders.

Wall Street Has Become More Upbeat on NKLA Stock

Last year, after Nikola suffered some setbacks, most of the Street was convinced that the company would never recover. However, citing its strong partnerships and pioneer-status in the potentially huge hydrogen-truck market, I remained largely upbeat on the shares.

Judging by two bullish notes on NKLA stock issued by major firms, it seems like Wall Street has now become more positive, too. On Dec. 28, JPMorgan analyst Paul Coster issued an upbeat note on the stock. In fact, Coster predicted that sentiment would improve in 2021, “as Nikola rolls out actual working trucks and other evidence its technology is workable.”

Projecting that its electric Tre trucks could be put on sale by the end of this year, Coster trimmed his price target on Nikola to $35 from $40 but kept his “overweight” rating.

On top of that, on Feb. 1, Wedbush analyst Dan Ives raised his rating on the shares to “hold” from “sell.” Ives noted that his worries about the company’s stumbles are over. He’s optimistic that Washington Democrats will enact policies benefiting Nikola.

The Hydrogen Revolution Will Probably Continue

One of the reasons I’m bullish on NKLA stock is because I still believe hydrogen trucks will become quite popular. Moreover, a recent column on Seeking Alpha only increased my belief in that theory.

The writer, Robert Vink, notes the following about fuel-cell trucks:

“[They] are great for long-haul trucking: refueling times are shorter while the range is longer. A huge bottleneck of electric vehicles is the weight of the battery, hydrogen vehicles become lighter as the volume of hydrogen in the tank reduces, this is not true for BEV [battery electric vehicle] […] Electric vehicles become heavier as the range increases due to the battery size, hydrogen vehicles barely do.”

Vink also points out that Nikola can benefit by using hydrogen to store electricity during times of the day when electricity supply is much higher than demand. Finally, he noted that the European Union (EU) is looking to greatly increase its hydrogen output in order to power trucks and store energy.

Plug Power and Nikola Could Be a Match Made in Heaven

There’s also potential for something bright in this company’s future.

I see it like this: Nikola is looking to launch many hydrogen stations in the U.S. and, of course, will ultimately build thousands of hydrogen-powered trucks. Meanwhile, Plug Power already has many hydrogen stations, produces a great deal of hydrogen and is looking to greatly raise that amount.

So, if the companies launch a comprehensive partnership or merge, they will both save a great deal of money and create powerful network effects. Specifically, Nikola would not have to build out its own hydrogen stations. It could also offer the buyers of its fuel-cell trucks discounts at Plug Power’s stations, making those trucks more attractive than the competition.

Additionally, as its revenue from selling the trucks increases, NKLA could build more hydrogen stations, either on its own or in partnership with Plug. Similarly, Plug Power would generate a great deal of demand for its hydrogen from the deal, guaranteeing it a new, stable source of revenue and enabling it to save on sales and marketing.

Basically, if a partnership were to emerge between PLUG and NKLA stock, it would have multiple benefits.

The Bottom Line

Nikola appears to have repaired its reputation on Wall Street. On top of that, there should be strong demand for its fuel-cell trucks as the world looks to drastically cut its carbon emissions.

When it comes to investing, too, the market capitalization of NKLA stock is a reasonable $8.8 billion. Plus, a potential alliance with Plug Power could really send its shares soaring.

Given these points, I continue to recommend that risk-tolerant, longer-term investors buy the stock.

On the date of publication, Larry Ramer held a long position in PLUG. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC