Nikola Corp. has experienced a week of remarkable resurgence as it looks set to recover close to 60% of its stock value. The electric-vehicle manufacturer's fortunes took a turn for the better following an announcement on Thursday regarding a supply agreement with hydrogen-supplier BayoTech for a fleet of up to 50 electric vehicles. This news was enough to reverse the stock's decline, which had led to a delisting warning in May.
The recent resurgence of meme stocks and increased investor interest in electric vehicle companies have propelled Nikola's stock price above $2 per share. However, there remains a risk of the stock falling below the crucial $1 mark that triggered the delisting warning. Despite the recent gains, Nikola's stock is still down more than 90% from its pandemic peak, when it reached an intraday high of $93.99 as a result of the retail-trading frenzy.
According to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners LLC, the current rally is being primarily driven by long buyers. As a result, short sellers have suffered significant losses, with data from S3 indicating around $176 million in lost profits over the past month, $123 million of which occurred in the past week.
Dusaniwsky suggests that if Nikola's stock price continues to rise, a short squeeze could occur, leading to further short covering and potentially exerting a greater impact on the stock's price in the future.
The recent surge in Nikola's stock is likely due to the involvement of retail traders. Data from Vanda Research reveals that individual investors bought $5.4 million worth of Nikola stock this week, with Thursday seeing the second-largest inflow of $4.1 million in over a year.
The significant gains have prompted investors to take positions in both put and call options, anticipating either a price correction or further upside. This has resulted in an increase in three-month implied volatility, a key measure of option pricing, which is currently near its peak for 2023. Additionally, total open interest in Nikola options has reached an all-time high.
Despite the enthusiasm from retail traders, Wall Street analysts are less bullish on Nikola. Among analysts tracked by Bloomberg, the company currently has only one buy recommendation and six hold recommendations.
Prior to the stock's meteoric surge, Evercore ISI suspended its rating and price target for Nikola. The analysts cited concerns over the company's ability to raise significant capital needed to fund operations into next year, along with the delisting risk and complications surrounding increasing the number of authorized shares. Former CEO Trevor Milton has also led a campaign against the proposed changes.
As of midday trading, Nikola's stock was up 5% following a 33% jump at the market open on Friday.