NKLA - Nikola upgraded to 'Buy' at BTIG amid expected hydrogen fuel focus

Nikola Corporation ( NASDAQ: NKLA ) is offering a buying opportunity for investors betting on an increased focus on hydrogen energy potential, per BTIG analyst Gregory Lewis.

Lewis explained that while the automaker’s battery electric vehicles (BEV) are currently drawing much of the attention, its hydrogen fuel cell electric trucks, on target for delivery in late 2023-24, offer the greatest growth potential. With the industry still in its nascent stages, there is significant upside ahead should the company be able to execute.

For the near term, the BEV business is undervalued, according to Lewis.

“We estimate the value of the Tre BEV business at $9-10/share, which with the stock trading around $5, points to upside in the BEV business which has at least been partially de-risked as Tre BEV deliveries have started,” he wrote. “We note with Tre BEVs on the road now the hard point begins which includes ramping production, gaining market share and increasing margins (we expect gross profit margins to turn positive sometime in 2024).”

He advised that the hydrogen business, meanwhile, should be considered as a “nice call option.” Lewis estimated the business is worth $3 per share at present, but has a runway for appreciation as the company expands infrastructure and hydrogen becomes a heavy focus of investors and governments alike.

"Given the inability of electricity to decarbonize heavy industries and long haul transportation we expect hydrogen to increase its share of the global energy mix over the next few decades," Lewis concluded. "The slope of that acceleration will be driven by economics and government support."

As such, Lewis upgraded the stock to “Buy” and assigned a $12 price target to the stock, suggesting over 100% upside to shares. Nikola ( NKLA ) stock rose 1.99% on significant premarket volume.

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