(Bloomberg) – Nikola Corp. has finally rekindled some of the passion of its once die-hard day trading fans.
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The electric vehicle maker is up around 60% this week, thanks to a rally driven by Thursday’s announcement of a supply deal for a fleet of up to 50 electric vehicles. The five-year deal was with a little-known startup, hydrogen supplier BayoTech, but it was enough to reverse the stock’s 2023 decline that led to a delisting warning in May and 75% losses in early June.
A recent resurgence in meme stocks has sparked interest in EV names and helped push Nikola above $2 a share. However, if investor interest wanes again, there is a risk that the stock could slip back below the $1 mark that triggered the Nasdaq Inc. alert. The stock is still more than 90% off its pandemic high as retail crowds pushed shares to an intraday high of $93.99.
“Right now, long buyers are in the driving seat,” said Ihor Dusanivsky, general manager of predictive analytics at S3 Partners LLC.
Read more: Meme stocks are back, briefly waving a ‘red flag’ for the S&P 500
According to data from S3, the rally wiped out short sellers who have lost about $176 million in profits over the past 30 days. Almost 70% of these losses occurred in the past week.
“If Nikola’s share price continues to rise, you can expect the short squeeze to tighten, cover more short sales, and the short side will have a greater impact on NKLA’s share price going forward,” Dusanivsky said.
It’s likely that retailers were responsible for much of the recent surge. Individual investors bought Nikola for $5.4 million this week, with Thursday’s $4.1 million bid marking the second-biggest inflow in more than a year, according to data Friday morning compiled by Vanda Research, which studies self-directed retail businesses worldwide.
The story goes on
The outsized gains prompted investors to add to both put and call options, positioning themselves for either a price correction down or additional upside. This week, three-month implied volatility — a key measure of how expensive options are — hovered near its 2023 high as total open interest surged to an all-time high.
Wall Street is less optimistic than Main Street. The company has six hold ratings and only one buy rating among analysts tracked by Bloomberg.
On Wednesday, ahead of the company’s meteoric rise, Evercore ISI suspended its rating and price target for the electric vehicle maker, citing, among other reasons, that the company was unable to estimate the timing of “significant capital increases” needed to fund the operations in the next year are required.
The analysts also pointed to the delisting risk and complicated shareholder procedures required to increase the number of shares authorized. There is also a campaign against the proposal, led by the company’s former chief executive Trevor Milton.
The stock closed up 1.4% on Friday.
– With the support of Bailey Lipschultz.
(Continuous updates to reflect the closing price of the stock)
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