JPMorgan Said GM (GM) Deal for Nikola (NKLA) 'Could Still Happen'

October 19, 2020 8:09 AM EDT
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Price: $13.29 -5.41%

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JPMorgan analyst Paul Coster reiterated an Overweight rating and $41.00 price target on Nikola Corp. (NASDAQ: NKLA) saying a GM deal could still happen.

"We believe Nikola and General Motors are still likely to enter into a strategic partnership by December 3rd," Coster stated. However, a deal could be re-structured.

"We think a more probable scenario is that the deal closes with the original terms, or it is re-engineered for a narrower scope that eliminates or down-sizes the Badger initiative (this seems like a net negative for GM, so they might seek more equity in return for the concession)," the analyst added. "But walking away from the deal completely seems unsatisfactory for both parties."

The analyst notes Nikola needs access to GM's supply-chain, engineering resource, the Ultium battery and Hydrotec fuel cells to de-risk the Class 8 truck initiative.

Meanwhile, GM needs to realize a return on billions of dollars of investment in Hydrogen fuel cells, and Nikola might be the best available option. He notes the Nikola partnership is already promoted by GM as one of six initiatives that constitute GM's "EV Ecosystem". Further, it is the only named initiative to exploit GM's fuel cell technology.

Coster said the Badger initiative might be of more interest to GM than the post-Milton Nikola, for whom it seems to be a distraction.

For an analyst ratings summary and ratings history on Nikola Corp. click here. For more ratings news on Nikola Corp. click here.

Shares of Nikola Corp. closed at $19.10 yesterday.

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