Nikola gets first sell rating as `dark cloud' gathers

Nikola Corp. shares nosedived on Thursday after the electric-vehicle startup got its first sell-equivalent rating, with Wedbush analyst Daniel Ives citing the loss of a driving force in its founder's departure, and the threat posed to hydrogen fuel's appeal by Tesla Inc.'s “eye-popping battery innovations.”

Nikola's shares have been on a roller-coaster ride, shedding nearly 80 per cent of their value since June's record high as the truckmaker has come under increasing scrutiny, resulting in its founder Trevor Milton's decision to resign as executive chairman on Monday. The stock fell as much as 24 per cent in New York to the lowest intraday level since May, extending the week's losses to over 50 per cent. It closed Thursday at US$19.10, down 9.7 per cent on the Nasdaq exchange.

“The recent questions surrounding the Nikola story raised by the bears will be a dark cloud over the stock until answered, especially with no fundamental or delivery catalysts in the near term,” Wedbush's Ives said in a report, cutting his recommendation to underperform from neutral and slashing his price target from US$45 to US$15, the lowest among analysts followed by Bloomberg.

Ives also bemoaned the founder's departure, saying that despite controversy surrounding Milton, he left behind a “huge void that is hard to replace,” heightening execution risk.

While Wedbush considers Nikola's electric-vehicle and hydrogen fuel cell ambitions “attainable in the semi-truck market,” the broker worries whether they can be delivered in time. Wedbush also pointed to up-and-coming electric-truck projects at Tesla and Daimler AG, with Tesla's latest advances in the cost of batteries a potential game-changer in the contest between this more-established technology and fuel cells.