Nikola share price on watch for upcoming Q1 earnings

When does Nikola report earnings?

Nikola is set to release its Q1 financial results on 7 May 2021, before the market opens.

What to expect?

Nikola’s share price has been hit with a series of adverse news after reaching its all-time high in June last year, which includes allegations of fraud, resignation of its founder and the equity deal fall-through with General Motors.

Given the company’s lack of financial track record thus far, investors will be on the lookout for the company’s business guidance and outlook. At its previous earnings call, the company revised its Nikola Tre BEV deliveries in 2021 down to a range of approximately 50-100 BEV trucks, from its previous target of 600, citing supply chain issues.

Refinitiv mean estimates also pointed to a potential bottoming out of losses in Q4 2020. Any further cut in projected output or wider-than-expected losses may be catalysts for downside risk.

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Growth catalysts on watch will be for any positive update with regard to its hydrogen-fuel network partner. Being faced with battery supply constraints affecting its projected output, any potential commitments with their battery suppliers will also ease investors concerns.

Investors may also note that any strong upside in share price may subsequently be met with company’s plans to raise capital from the market. This was previously hinted by the management in its previous earnings call to ensure ‘ample liquidity at least 12-18 months in advance’.

How to trade Nikola earnings

Nikola’s valuation is largely priced based on market expectations of the company’s growth roadmap. Near-term, its share price may continue to be driven by news flow, considering its lack of financial track record or sales figure.

Based on Bloomberg data, its short interest as percentage of equity float was last shown at 23.5%. Therefore, any positive news catalyst may potentially result in a strong up-move in share price from short-covering. That said, investors who are in for the long haul may take note of the company potentially raising capital from the equity market in the event of stronger share price performance.

Currently, the stock has two ‘buy’ recommendations, six ‘holds’ and no ‘sells’. The Bloomberg 12-month consensus target price of $21.86 suggests a potential 88.9% upside from the current price.

Technical analysis

Nikola share price has been stuck in a downtrend since June 2020, characterized by its lower price highs and lower price lows over the past few months. Price movement may seem to trade within a falling wedge pattern, where one may find resistance at the 14.00 psychological price level in coincidence with the upper trend line of the falling wedge.

If prices are able to close above 14.00, the next resistance level may then be at 17.30, a previous support-turned-resistance horizontal price level. Key support level for share price may be at the lower trend line of the falling wedge, potentially around the 9.00 region.

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