Nikola Corporation (NKLA) shares fell more than 20% after the electric vehicle company registered to sell up to 23.9 million shares and time-to-time sales of up to 53.39 million shares and 890,000 warrants from shareholders. The private warrants were originally issued in a private placement tied to the initial public offering (IPO) of VectoIQ. Investors are betting that the move could significantly dilute existing shareholders.
In the aftermath of the capital raise, Deutsche Bank analyst Emmanuel Rosner sees an attractive entry point after the technical selling pressure fades. Rosner believes that Nikola stock is a rare pure play on zero-emission commercial trucks, where global regulations could drive strong adoption rates. The analyst maintains a Hold rating and $54.00 per share price target.
Deutsche Bank and other analysts are bullish on Nikola's fuel cell solutions that bundle electric trucks, hydrogen fuel, and full service and maintenance into a single contract priced lower than the ownership of traditional trucks. These contracts could be a compelling option for fleet operators and generate solid revenue for Nikola at attractive returns through the life of the vehicles.
From a technical standpoint, the stock broke down from the 200-day moving average to close a gap dating back to early June. The relative strength index (RSI) fell to 37.67, but the moving average convergence divergence (MACD) remains in a strong bearish downtrend. These indicators suggest that the stock could see greater downside ahead before experiencing any consolidation.
Traders should watch for a further breakout to retest prior highs of around $35 over the coming sessions. At that point, the stock could consolidate before potentially rebounding higher or breaking down lower. A rebound could lead to a retest of trendline resistance near the 50-day moving average at $47.68, while a breakdown could lead to to a move toward the 200-day moving average at $20.03.
The author holds no position in the stock(s) mentioned except through passively managed index funds.