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Two US Stock to Look at – SPCE, NKLA

Jul 01, 2020 | Team Kalkine
Two US Stock to Look at – SPCE, NKLA


 

 Virgin Galactic Holdings Inc

 

SPCE Details
 
Virgin Galactic Holdings, Inc. (NYSE: SPCE) is a vertically integrated aerospace company pioneering human spaceflight used for private individuals and researchers. Recently, the company notified about the successful completion of the second SpaceShipTwo test flight from Spaceport America. On June 19, 2020, the company along with partners commenced a new scholarship, mentoring and fellowship program for Black scholars pursuing STEM education with an emphasis on aerospace. In another update,the company and its wholly-owned subsidiary, The Spaceship Company (TSC), updated the market that it has inked a Space Act Agreement with NASA to accelerate the expansion of high-speed technologies.
 
Q1FY20 Highlights for the Period Ended 31 March 2020:  SPCE recently declared its quarterly results, wherein the company posted a net loss of $59.9 million as compared to a loss of $42.6 million in Q1FY19. The company reported revenues of $238K as compared to $1.78 million in the previous corresponding period. Selling, general, and administrative expensive stood at $26.7 million, as compared to $12.3 million reported in the year-ago period. At the end of the quarter, the company had a cash balance of $419 million. 
 
 

Key Q1FY20 Income Statement Highlights (Source: Company Reports)
 
Growth ImpetusFast advancing technologies, reducing costs, open innovation models with increased access to technology and better availability of capital have propelled significant growth in the commercial space market. Consequently, these positive trends will aid the company to build a robust economic value and future growth.
 
Key RisksOn the flip side, the company has incurred significant losses since its inception. Notably, net losses for the year 2019, 2018 and 2017 amounted to $210.9 million, $138.1 million, and $138.2 million, respectively. Furthermore, increased operating expenses and future negative cash flow due to higher investment in acquiring future astronauts or expanding its operations may dampen financial aspects of the company.
 
Stock RecommendationThe stock of SPCE is closed at $15.42 with a market capitalization of ~$3.2 billion. The stock is trading at the lower band of its 52-week trading range of $6.90 and $42.49. The stock has generated a negative return of 8.85% in the last three months. The company is yet to deliver a positive bottom-line, however, it is progressing well in its spaceship segment and looking to provide trips to space to the astronauts. We would like to see further business activities and development to support the fundamentals of the company. Hence, Considering the current trading levels, business prospects and earnings to be released on August 3, 2020, we have a wait and watch stance on the stock at the current market price of $15.42 per share, down 0.84% on 29 June 2020.

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

Nikola Corporation

 

NKLA Details
 
NKLA Appoints Two Industry Veterans: Nikola Corporation (NASDAQ: NKLA) is involved 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 10, 2020, the company stated that it has added two industry veterans to its executive team namely Pablo Koziner, who will lead as a president of NKLA Energy and Mark Duchesne, who will be NKLA’s global head of manufacturing. 
 
NKLA Signs Deal with Nel ASAIn 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 are expected to produce more than 40,000 kgs of hydrogen per day, with an order value of more than USD $30 million.
 
NKLA and VectoIQ Complete Business CombinationOn June 3, 2020, the company completed its previously announced business combination with VectoIQ Acquisition Corp. The merged entity is now called “Nikola Corporation” and is listed on NASDAQ under “NKLA” ticker. This move further strengthens Nikola’s position as a top leader in zero-emission infrastructure & transportation solutions.
 
NKLA Terminates Agreement with RyderOn 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.
 
Future Growth ProspectsNikola raised more than $700 million through the business combination and PIPE. The deal proceeds are likely to 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.
 
Key RisksBeing 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.
 
Stock RecommendationThe stock of NKLA closed at $67.57 with a market capitalization of ~$24.4 billion. The stock made a 52-week low and high of $9.92 and $93.99, respectively, and is currently trading at the upper band of the range. The stock of the company went up 122.98% in the past one-month period and 475.11% in the last three months. Recently, the company stated that consumers can now secure pre-orders of Nikola Badger electric pickup at Nikola World 2020 ticket and receive a discount off vehicle purchase. Considering the latest business combination, current trading levels, and limited financials, we would like to wait for further information with regards to financial results, etc., and hence, suggest a watch view on the stockat the closing price of $67.57, up 6.33% as on 29 June 2020.
 
 
NKLA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)


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