Why Nikola Has 'Everest-Like' Uphill Challenges To Turn Investor Sentiment Around

Nikola Corporation NKLA reported forecast-beating bottom-line results on Tuesday.

The Nikola Analyst: Wedbush analyst Daniel Ives maintained a Neutral rating on Nikola shares and lowered the price from $13 to $10.

The Nikola Thesis: Nikola's second-quarter results reflected tighter-than-expected cost controls, Ives said in a note.

With fierce competition expected over the next decade, execution and delivery of its hydrogen trucking vision over the coming years matters for this pre-revenue company.

Nikola has some "Everest-like" uphill challenges in the near term to change investor sentiment toward it, especially after former CEO Trevor Milton's indictment, Ives said.

Related Link: Nikola Moves On From Trevor Milton To Tackle Supply Chain Shortages

"Nikola is a story stock and a major "prove me" name for now," the analyst said.

The value proposition in the potential story stock is the company's investments into a hydrogen-powered battery and the benefits of this type of electricity/battery versus the traditional battery electric motors currently used in EV's globally, he added.

Laying out a tight and step-by-step roadmap that investors can clearly judge success/failure will be the key to success between now and 2023, according to Wedbush. The chip shortage will remain a near-term overhang.

NKLA Price Action: After shedding about 8.7% Tuesday in reaction to earnings, Nikola shares were last seen trading up 4.6% at $10.68. The stock has a 52-week high of $54.56 and a 52-week low of $9.37.