Nikola Corporation

NKLA Details 

NKLA and VectoIQ Completes Business Combination: Nikola Corporation (NASDAQ: NKLA) is engaged in transforming the transportation industry across the globe. The company is engaged in designing and manufacturing hydrogen-electric & battery-electric automobiles, energy storage systems, and hydrogen fueling station power supplies. On June 3, 2020, the company completed its previously announced business combination with VectoIQ Acquisition Corp. VectoIQ, earlier, was formed with the purpose to acquire one and more businesses and assets, through merger, capital stock exchange, asset acquisition, stock purchase and reorganization. The merged entity is now called “Nikola Corporation” and is listed on NASDAQ under “NKLA” ticker. Notably, the business combination was accepted by VectoIQ’ stockholders in a special meeting held on June 2, 2020. This move further strengthens Nikola’s position as a top leader in zero-emission infrastructure & transportation solutions.

Synergies from the Combined Business: Nikola raised more than $700 million through the business combination and PIPE. It is to be noted that Nikola intends to use the proceeds to hasten its battery-electric portfolio and hydrogen fuel-cell electric vehicles (FCEV) aiming for zero emissions worldwide. The deal proceeds will also aid Nikola to solidify on its state-of-the-art production facility in Coolidge and boost its launch of hydrogen station infrastructure. Notably, Nikola’s pre-orders represent more than $10 billion in potential revenue. Further, with the roll out of the company’s Nikola Tre Class 8 BEV, NKLA is likely to garner revenues by 2021. The company also expects to unveil Nikola Two Class 8 FCEV at the beginning of 2023.

NKLA Signs Deal with Nel ASA: In another update, Nikola signed a procurement order with Nel ASA, for 85-megawatt alkaline electrolyzers assisting 5 of the world’s top 8 ton per day hydrogen fueling stations. Collectively, these electrolyzers is expected to produce more than 40,000 kgs of hydrogen per day, with an order value of more than USD $30 million. 

NKLA Terminates Agreement with Ryder: On May 29, 2020, Nikola Corporation and Ryder System, mutually decided to cease their special partnership with respect to the hydrogen electric semi-trucks. Consequently, both companies can now delve into evolving prospects within the fast expanding commercial transportation industry. Both the company view this judgment positively and are now open to new business agreements with other partners as the industry remains to progress.

Stock Recommendation: The stock of NKLA closed at $79.73 with a market capitalization of $2.36 billion. The stock made a 52-week low and high of $9.92 and $93.99 and is currently trading at the upper band of the range. The stock of the company went up 382.92% in the past one-month period. Being in an early stage, the newly formed entity has its own share of difficulties, one of which is limited operational history along with the absence of any immediate revenue generation capacity. Further, cash management is also a challenging task for this newly formed business. On the valuation front, the stock is trading at a P/BV multiple of 9.9x as compared to the industry mean of 2.4x on TTM (Trailing Twelve Months) basis. Considering the latest business combination, recent gains, valuation on TTM basis, and current trading levels, we have a watch stance on the stock at the closing price of $79.73, up 8.82% as on 9 June 2020.

NKLA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Novavax, Inc.

NVAX Details

NVAX Bestowed DoD Contract: Novavax, Inc. (NASDAQ: NVAX), is a late-stage biotechnology company that offers health services via the production, distribution and development of pioneering vaccines used to prevent infectious illnesses. On 4 June 2020, the company stated that it has been granted a contract by the United States Department of Defense (DoD) to produce its COVID-19 vaccine candidate, NVX-CoV2373. Per the deal, NVAX will produce approximately 10 million doses of the coronavirus vaccine candidate. These doses will be utilized in phase 2/3 clinical trials or under an Emergency Use Authorization (EUA), post the permission by the FDA. NVX‑CoV2373 comprises a steady, prefusion protein antigen that includes Novavax’s proprietary Matrix‑M™ adjuvant.

Other Recent Updates: Recently, the company stated the buyout of Praha Vaccines a.s., part of the Cyrus Poonawalla Group, in an all cash transaction of around $167 million. The facility is likely to offer more than 1 billion doses of annual capacity of antigen commencing from 2021 for NVX‑CoV2373. In another update, Novavax announced that it has enrolled for the first participants in a Phase 1/2 clinical trial of its NVX‑CoV2373, coronavirus vaccine candidate. The results of the safety data relating to Phase 1 trial are expected in July 2020.

Q1FY20 Business Highlights for the Period ended 31 March 2020: NVAX announced its quarterly results, wherein the company reported total revenue of $3.38 million as compared to $3.98 million in the previous corresponding period. The decline in year over year revenues was on the back of termination of the Prepare™ trial in FY19, partially offset by revenue from CEPI’s funding. The company reported lower research and development (R&D) expenses of $16.9 million as compared to $35.5 million in the previous corresponding period. The decrease in R&D was on the back of lower development activities, lower ResVax related clinical trial expenditure, lower employee-connected costs, and other cost savings due to the Catalent transaction. NVAX reported lower net loss of $25.86 million as compared to a loss of $43.2 million in 2018. The company exited the period with cash balance of $179.9 million.

Key Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of NVAX closed at $45.93 with a market capitalization of $2.69 billion. The stock made a 52-week low and high of $3.54 and $61.50 and is currently trading at the upper band of its 52-week trading range. The stock jumped 145.22% and 358.38% in the last one week and one month, respectively on the recent update on the development of Novel COVID-19 Vaccine. Going forward, the company expects to strengthen its balance sheet and CEPI’s substantial funding. On the valuation front, the stock is trading at an EV/Sales multiple of 35.2x as compared to the industry mean of 291x on TTM (Trailing Twelve Months) basis. Considering the aforesaid facts, risk-reward profile and progress of the clinical trial related to novel COVID-19 Vaccine, we recommend a “Hold” rating on the stock at the closing price of $45.93, up 2.55% as on 09 June 2020.

NVAX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.