Times are more than just tough for the ones still trading in Nikola Corp. ($NKLA). The company’s stock has been on a downward path for months and there does not seem to be any counter-movement. After allegations of fraud on the part of the shortsellers, who in some places refer to the group as nothing more than a fairy tale, a real crash was inevitable. The consequence? Prices have fallen by almost a stunning 80% since last summer, meaning the end of this share seems to be slowly approaching. Lets have another look at Nikola in the run-up to next week’s earnings report.

How long will this Titanic remain above water level?

Various analysts view the stock with great skepticism and justify this mainly with the numerous uncertainties that accompany it. There is no telling whether the great turning point will ever come again or whether confidence will return in the form it once knew. Even if the decline stagnates, it will probably no longer have the potential it had before. According to the latest reports, the first hydrogen cars will be produced in 2023 and the promised and necessary factory to be built for this is far from finished and some employees even claim that the work has been halted for a while.

To survive on the stock exchange market, Nikola simply needs to receive positive news of unthinkable size. In the form of reliable figures that could invalidate the allegations of the skeptics. As it cannot be predicted when – or even if – this will happen, investing in Nikola involves a high degree of risk. It even got to a point where some analysts labelled the stock as “bear of the day“.

There seems to be no escape in other areas either and dark clouds continue to form over the company. James Wilson, a securities litigation partner, yesterday encouraged investors who have incurred more than $500,000 in losses in Nikola to contact him directly to discuss their options. This refers to future lawsuits and negotiations that could be detrimental to the company.

What should it do if it wants to stay upright?

It is now imperative for Nikola to regain investor credibility step by step, with earnings updating another building block along that path. Essentially, it is now a pre-income business, with the pressure on the management team setting up the execution, timetable and build-out strategy for its EV and hydrogen fuel cell roadmap. The earnings report is expected next week and it can’t afford to make mistakes anymore.

The significantly heightened execution risks for Nikola keep Wedbush in bear camp in the near term with an underperform rating and a 12-month price target of $15. Source: SeekingAlpha

“Overall we still believe the company’s EV and hydrogen fuel cell ambitions are attainable in the semi-truck market, although we have serious concerns that the execution and timing of these ambitious goals stay on track over the coming years,” said analyst Dan Ives.

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By Omar