February 11th, 2021 | 12:21 CET
Nikola, Nevada Copper, Nel ASA - breakout as expected!
Table of contents:
Threatened by scarcity
The decision of politicians and industry to focus on electromobility in the future is putting enormous strain on the raw material supply chain. The carrier metal copper is also affected. We encounter copper in many areas of life - in information and communications technology, electrical engineering and renewable energies. It is not without reason that the price of copper is rising steadily. If professional market observers are to be believed, the metal's price is likely to multiply in the coming years. By investing in shares of copper producers, one can participate in the current development.
Nevada Copper is the first new US copper producer in a decade. The Canadians have been in the market since 2007, exploring for metals near the corporate headquarters of Tesla and Google in the US state of Nevada at their own Pumpkin Hollow copper project. Pumpkin Hollow has significant reserves and resources, including copper, gold and silver. The Company's two fully-permitted projects include the high-grade deep mine and processing plant, now in production, and a large open-pit project that has progressed toward feasibility.
Over the past year, experienced management has been put in place and the debt problem that Nevada Copper had carried for years has eased. In January, a significantly oversubscribed CAD 33.0 million private placement was completed. The capital raised is to repay outstanding debt and construct or expand the Company's Pumpkin Hollow underground mining project. The Company is currently valued at CAD 260 million. Assuming copper prices continue to rise, the Nevada Copper share offers good opportunities for price gains as an investment.
The second half of 2020 was one to forget for Nikola, a truck manufacturer specializing in hydrogen technology. After the successful IPO on June 4, 2020, with an opening price of USD 35, it abruptly went within weeks towards the all-time high of USD 93.99. Comparisons with competitor Tesla had Nikola almost approaching the stock market valuation of General Motors. Through the IPO, the startup hoped to raise more funds for the infrastructure expansion of hydrogen fueling stations, which were to be built with the help of Norwegian hydrogen Company Nel ASA. In addition, the Company hoped to accelerate the production of its trucks.
The positive news flow continued in September when the planned entry of General Motors and massive follow-up orders were to take place. At first, the Nikola share marched to USD 54, before allegations of fraud by "Hindenburg Research" made the rounds. The share price subsequently collapsed to USD 37. The accusations, however, are enormous. Allegedly, Nikola lifted a truck model onto a mountain and then let it roll down into the valley.
The consequences were logical. General Motors withdrew from the planned collaboration. Likewise, the planned order for Nel ASA was gone. And CEO Milton had to vacate his chair. Currently, some calm has returned. JP Morgan analyst Paul Coster published a positive note on the stock at the end of the year. Coster predicted sentiment would improve in 2021 "when Nikola unveils working trucks and other evidence that its technology works." The analyst, who expected Nikola's electric trucks to be on the market by the end of this year, reduced his price target on Nikola to USD 35 from USD 40 but maintained his "outperform" rating.
In addition, Wedbush analyst Dan Ives raised his rating on the stock to "hold" from "sell" on February 1. The reason lies in the optimism that Democrats in Washington will make policies in favor of Nikola. The US Department of Energy announced it would fund research into hydrogen fuel cell technology, an area that is central to the Company's growth. News that President Joe Biden plans to replace the US national car fleet with electric vehicles is also fueling the industry.
Share interesting and speculative
Last week, Nikola was short-listed as the next short-squeeze candidate after GameStop. What can speak for a short squeeze is indeed the very high short ratio of more than 40%. At the moment, the stock market valuation is USD 8.8 million. The price is currently at USD 22.90 in an interesting formation. A breakout above the resistance at USD 25 would result in the next price target at USD 37.95. A breach above this previous high would open the way chart-wise to the 2020 all-time high at USD 93.99. We want to point out that an investment in Nikola is very speculative.
Conflict of interest
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