Nikola’s Heart Attack; Picking up the Slack; Moderna’s Back
But I Said No Take-Backsies!
You ever have a deal go bad on you?
Like, I don’t know … you finally get an order confirmation for a PlayStation 5 — something you dreamt about buying since it launched — and all of a sudden, that order gets canceled?
No warning. No indication that anything’s wrong. Just an email from Kohl’s telling you the order is canceled. (Am I bitter? Yes, I’m bitter…)
This again? Somebody get this man a PS5 already so we can start talking about the market!
Hold on … there’s a market lesson in here too, Great Ones. A lesson that Nikola (Nasdaq: NKLA) investors know all too well today.
Remember, remember! The eighth of September. The Trevor Milton treason and plot. I know of no reason why the GM deal should ever be forgot!
Back in September, Nikola announced that General Motors (NYSE: GM) would manufacture the Nikola Badger — an electric truck using GM’s Ultium battery technology. GM was also supposed to take a $2 billion stake in Nikola, and the two companies would work together on electric and hydrogen tech.
That deal is no more.
Whether or not the partnership fell through because of former Nikola CEO Trevor Milton’s alleged indiscretions remains to be seen. What is clear is that Nikola went from a Badger production deal and a $2 billion GM stake … to what amounts to a glorified supply contract.
Under the terms of the new deal, GM will supply its Hydrotec fuel cell system for use in Nikola semi-trucks. That’s it. That’s the deal.
Wait! Hold up. I thought Nikola had its own fuel cell system?
So did quite a few investors. And this is the crucial question here regarding Nikola. Is the Nikola-GM supply deal a sign that Nikola’s fuel cell tech just isn’t ready for prime time yet? Or is it a signal that this fuel cell tech is basically vaporware?
I get that, as a small startup, Nikola doesn’t have the production capacity to meet public demand for fuel cell trucks.
However, I expected any supply deal to be for the production of Nikola’s fuel cells — not for a competitor’s product. It’s like Tesla saying it has great battery technology, but instead of building its own batteries, it continues to buy from Panasonic.
Now, this news doesn’t mean that Nikola is an immediate flop — there’s still some investment potential there. But, the vast majority of excitement surrounding the company just went up in smoke.
At least I got $180 in Kohl’s Cash as a consolation for my failed PlayStation 5 purchase. Nikola investors don’t even get that.
But if you feel sore over Nikola, I’ve got a much better deal that could ease your pains. No, it’s not a GM deal or a PlayStation 5 (Seriously, give it up, man!) or even Kohl’s Cash…
It’s a ground-floor investment idea in battery tech that you absolutely need to see for yourself. It comes from a California company that may be far from a household name, but it holds all 100 patents on a “superbattery” that could power a whole American city … for free!
The Good: Vax Happened
We now have a veritable smorgasbord of COVID-19 vaccines coming to market!
Moderna (Nasdaq: MRNA) announced the results of its Phase 3 clinical study, and its vaccine is 94.1% effective. What’s more, the company’s vaccine is 100% effective at preventing severe cases — i.e., cases requiring hospitalization.
That second tidbit is pretty impressive, and it’s one we’ve not heard about other vaccines from Pfizer or AstraZeneca.
But Moderna has a couple of benefits that the other two vaccine makers don’t.
First, Moderna’s vaccine is stable at normal refrigeration temperatures. So, there’s no need for special trucks or transportation like Pfizer’s vaccine. Second, Moderna’s vaccine doesn’t show any of the questionable side effects that AstraZeneca’s vaccine is having.
On that note, Moderna applied for emergency use authorization with the FDA today.
While I think we’re all just happy to verge on ending this pandemic, MRNA investors already took a victory lap. The stock rose more than 15% today and is up more than 725% year to date.
The Bad: Slackin’ for a Living
It’s billed as one of the biggest software acquisitions ever. Ever!
Salesforce.com (NYSE: CRM) is reportedly in talks to buy Slack Technologies (NYSE: WORK). Of course, neither company commented on the deal, but Slack currently sports a market capitalization of $23 billion.
Add a buyout premium to that, and this deal could easily top the prior software buyout record: the $34 billion that IBM paid for Red Hat back in 2018.
That sounds tremendous, Mr. Great Stuff! But why is this the “bad?”
That’s the thing, isn’t it? You see, Slack is losing ground to Microsoft (Nasdaq: MSFT). Furthermore, Microsoft itself looked to buy Slack for $8 billion in 2016. Ol’ Softy passed and instead launched Teams as part of Microsoft Office 365.
Salesforce already competes directly with Microsoft on several fronts.
A Slack acquisition would open up another direct line of competition between the two. While Slack will certainly have more ammunition against Microsoft under Salesforce’s banner, it remains to be seen if the tie-up will have any real impact on an increasingly crowded communication market.
Investors certainly hope so. WORK soared more than 43% since the news broke last week. CRM, meanwhile, is off nearly 10% on the acquisition rumors.
The Ugly: Battery Nirvana?
There’s so much irrational exuberance in the electric vehicle (EV) market right now that it’s just unreal. I’m getting dot-com bubble vibes here … seriously.
Today’s entry into the EV insanity is QuantumScape (NYSE: QS). The company makes solid-state lithium-ion batteries, mainly for EVs. QuantumScape claims its batteries provide greater range, faster charging, safer operation … and cheaper pricing!
What’s more, QuantumScape is backed by Bill Gates and Volkswagen. It even has former Tesla Chief Technology Officer J.B. Straubel on its board!
If that all sounds too good to be true, you’re right: It is. For now, at least.
QuantumScape says that battery production is still several years away. Volkswagen hopes to use the company’s batteries in 2025 — five years away.
Thanks, Einstein. I can do math!
Errm, right. Anyway, I typically don’t dish dirt on tech stocks, even if they are startups.
However, QS shares went public via a special purpose acquisition company (SPAC) merger, raising some initial questions over why it didn’t go the traditional IPO route.
But the biggest red flag is that QS, with a product five years down the road, has surged more than 66% since it went public.
If you got in when QS initially went public, you got a really good deal. The company has excellent prospects — especially if its batteries deliver on QuantumScape’s promise to increase EV range to 500 miles.
Right now, however, the stock is priced to perfection, as the brokerage community likes to say.
How do you feel today, Great Ones? Still groggy? Check. Overstuffed? Double check. Ready for another helping of earnings? You betcha.
The earnings horde has thinned considerably since weeks past. But we know you keep your eyes sharp and ears perked for any and all excitement in the earnings arena. So, take a look at this week’s card in earnings land bingo, courtesy of Earnings Whisper on Twitter:
Go ahead and cover up your odd-one-out financial stock free space with TD Bank (NYSE: TD) reporting on Thursday. As you’d expect, one bank won’t steer the market’s ship … a bank parade would, but TD alone is a bit of a snoozer in this earnings roundup now with Ameritrade out of the picture.
Now, by the time you’re reading this, Zoom Video Communications’ (Nasdaq: ZM) report will be out there in the open. And the oft-heralded stay-at-home king already has to defend its throne against the droves of cloud stocks buoyed by the pandemic.
Therein lies the silver lining in this week’s reports: For more potential stay-at-home stock picks, we head once again into the virtual worlds of the clouds … and cloud stocks. They’re the digital all-in-one, each offering a slightly different blend of storage space, remote working tools, data analytics or sometimes an e-commerce platform.
Off the bat, Snowflake (NYSE: SNOW) has big hype to live up to when it turns informer for its first report post IPO. Price-to-sales ratio? Never heard of her.
Like Snow, Cloudera (NYSE: CLDR) uses the cloud for analytics and machine learning (because everyone has to have a dash of artificial intelligence there as well). Though how much the company stands out in the busy space also remains to be seen.
Box (NYSE: BOX) covers everyone from Joe Schmoe to corporate clientele on the cloud storage front, serving up much-needed file space and the ability (well … in theory) to easily work with teammates online.
Fresh out of the buyout rumor mill, Salesforce will head into the earnings box to once again beef up against the mighty Microsoft … and it’ll be clear if and how much the company needs to pick up the Slack.
What hasn’t slacked off, though, is Great Stuff Pick CrowdStrike (Nasdaq: CRWD). Up over 170% since we recommended it early this year, CrowdStrike powers cybersecurity for these platforms and other corporate giants.
Now, if past weeks showed us consumer confidence, this is our snapshot into enterprise confidence — how much business-to-business business these businesses received. Are corporate clients stingy on the data front? Or is everyone chomping at the bit to gain a cloud-based edge in the new digital world?
By the way, if none of these names send you soaring into the cloud market, check out the one tech the cloud can’t exist without: connectivity … and internet that doesn’t completely suck eggs. 5G is the one tech that will make today’s connections look like dial-up — cloud or no cloud.
Last (and possibly least) come the last reporters of the retail bunch. They’re not the most exciting names this week, no sir … and they may not be major market-movers either. But if you’re looking for the discount retailers most likely to boom amid a pandemic, say no more!
This week sees reports from Ollie’s Bargain Outlet (Nasdaq: OLLI), Big Lots (NYSE: BIG), Five Below (Nasdaq: FIVE) and Dollar General (NYSE: DG). As the pandemic consumer climate continues to change, so too do those chained to the brick-and-mortar grind.
Remember, this ain’t a Target or Walmart situation with these discount stores. Without much of an online presence, how much can these retailers pull with sales and foot traffic alone? Join us this week as the earnings confessional churns.
Let us know what stocks caught your eye in today’s chart at GreatStuffToday@BanyanHill.com.
And whether you have questions a-brewing or rants a-stewing, make sure you stop by our inbox and give us a good what-for. We’d love to hear from you, night or day!
Until next time, stay Great!
Editor, Great Stuff