With Fraud Case in Rear-view Mirror, It’s Time To Reconsider Nikola

Arizona-based electric vehicle (EV) start-up Nikola (NASDAQ:NKLA) is, without a doubt, among the most controversial names on Wall Street today. Traders either love or hate NKLA stock, it seems.

Image of NKLA logo on phone screen
Source: Stephanie L Sanchez / Shutterstock.com

It’s not difficult to identify the main source of the controversy. In July of last year, the U.S. Securities and Exchange Commission (SEC) charged Nikola founder Trevor R. Milton with “repeatedly disseminating false and misleading information.”

In December, Nikola agreed to pay $125 million to settle the SEC’s charges. The company commented, “We are pleased to bring this chapter to a close as the company has now resolved all government investigations.”

Yet, apparently Wall Street isn’t ready to let go of the past and appreciate Nikola’s recent achievements. This presents an opportunity for enterprising investors. There may be a delayed — but very powerful — positive reaction in the Nikola share price soon.

A Closer Look at NKLA Stock

Unless you had perfect timing, it was difficult to profit from NKLA stock last year. The stock started off 2021 at around $18, peaked soon afterwards at $23 and it was all downhill from there.

The summer was particularly rough, as the Nikola share price tumbled below the key $10 level. This downward price pressure was, most likely, primarily due to the aforementioned SEC probe.

That level is important because NKLA stock was once a special purpose acquisition company (SPAC) stock which traded near the typical SPAC stock price of $10.

It’s sometimes said that when a SPAC stock falls below $10, that’s a bad omen. And indeed, the Nikola share price has continued on its downward trajectory, hitting $7.50 in late January 2022.

For the time being, the buyers need to hold the $5 level. Otherwise, NKLA could become a penny stock (informally defined as a stock trading for less than $5 per share).

From Fraud Fiasco to California Clearance

Hopefully, prospective investors will be able to look beyond last year’s fraud charges, and toward Nikola’s auspicious beginning to 2022.

Already, there are signs that Nikola is starting a new chapter. For example, Nikola just scored a major win in the EV-friendly state of California.

Specifically, the automaker’s Tre battery-electric vehicle (BEV) has been deemed eligible for the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project program by the California Air Resources Board.

As a result of this approval, Tre BEV buyers in California can qualify for an incentive valued at $120,000 per truck.

That’s right — a $120,000 discount per vehicle, courtesy of California’s voucher program. Clearly, the state is pushing hard for clean-energy vehicle ownership, and Nikola stands to benefit from this.

Two LOIs for Better ROI

As it turns out, the good news from California isn’t the only positive recent development for Nikola.

Indeed, two letters of intent (LOIs) for purchase orders highlight Nikola’s turnaround story in January.

On Jan. 6, Nikola revealed that less-than-truckload company Saia (NASDAQ:SAIA) had signed a LOI to purchase or lease 100 Tre heavy-duty BEVs following the satisfactory completion of a demonstration program.

If everything goes according to plan, delivery of the 100 vehicles should occur between 2022 and 2024, with the initial 25 deliveries targeted for 2022.

Then, on Jan. 11, Nikola disclosed that logistics provider Covenant Logistics Group (NASDAQ:CVLG) had inked a LOI to purchase 50 of Nikola’s zero-emission vehicles.

That total is to include 10 Tre BEVs and 40 Tre fuel cell electric vehicles (FCEVs). However, this would take place after the satisfactory completion of a demonstration program.

Delivery to Covenant of the first Tre BEV truck and mobile charging trailer for testing is should take place during 2022’s second quarter. Moreover, the Tre FCEV testing is anticipated to occur in 2023.

The Bottom Line on NKLA Stock

As you can see, there have been a number of recent, positive developments with Nikola. Yet, some skeptics will only focus on the company’s problems of the past.

2022 could turn out to be a terrific year for Nikola. Already in January, there were signs that the automaker may be on the cusp of a turnaround.

With that in mind, it’s time for Nikola’s detractors to give the company a chance to redeem itself. And as for NKLA stock, the worst may be over as a controversial EV maker ambitiously seeks a new, fresh start.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2022/02/nkla-stock-ceos-fraud-case-in-rear-view-nikola-deserves-revisiting/.

©2022 InvestorPlace Media, LLC