Nikola Corporation

NKLA Details

Nikola Corporation (NASDAQ: NKLA) is a designer and manufacturer of zero-emission battery-electric (BEV) and fuel cell electric (FCEV), electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen station infrastructure. Its Truck Business Unit manufacturers BEV and FCEV Class 8 trucks, whereas the Energy Business Unit develops and constructs a network of hydrogen fueling stations for FCEV customers.  As of July 06, 2021, the company’s market capitalization stood at USD 6.50 billion.  

Overcoming Supply Hurdles in Midwest: On June 22, 2021, NKLA announced that it has invested USD 50 million together with stock in exchange for a 20% stake in Wabash Valley Resources LLC, intending to develop the clean hydrogen production project in West Terre Haute, Ind. The project provides NKLA with a significant hydrogen hub comprising a daily offtake capacity of 50 tons for supply to its fueling stations in the US Midwest region.

Step Towards Sustainable Transportation: On May 06, 2021, NKLA collaborated with Total Transportation Services Inc. for vehicle trial and a Letter of Intent (LOI) to order 100 BEV and FCEV trucks to facilitate zero-emission transportation at the Port of Los Angeles/Long Beach. Deliveries are expected to start in H1FY21 with two BEV and FCEV each, followed by 30 BEVs in the latter part of FY22 subject to vehicle trial and government funding, and the remaining 70 FCEVs to be delivered in FY23.

Q1FY21 Results: NKLA did not report any revenue in Q1FY21 (ended March 31, 2021) from the electric vehicle business. However, it had reported revenue from solar installation projects which ceased operations in FY20. It reported an operating loss of USD 120.59 million in Q1FY21 vs USD 32.01 million in Q1FY20 which was up by 276.88% in Q1FY21. The expansion in operating loss can be attributable to high expenses on purchased components and outside engineering services, and inflated employee costs. The company’s net loss for Q1FY21 was USD 120.22 million in contrast to USD 33.15 million in Q1FY20.

Key Risks: The company is facing litigation charges and investor claims for misrepresenting its technology and business resulting in the exaggeration of its financial prospects. In addition, THRY sources the majority of its components from single-source suppliers, and any lag in the supply of the requisite quantity or unfavorable pricing could distort its production and in turn, could negatively impact the overall performance of the company.  

Outlook: As of Q1FY21, NKLA forecasts to start vehicle trial production both at its JV manufacturing facility on IVECO's industrial complex and at the greenfield manufacturing facility in June and July 2021, respectively. It expects to construct its first hydrogen station in FY21 and to deliver the first Nikola Tre BEVs to customers in Q4FY21.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

NKLA Daily Technical Chart (Source: Refinitiv)

Stock Recommendation: NKLA has decreased by 30.46% in the past 9 months, and is currently close to the lower band of the 52-week range of USD 9.37 to USD 59.85. The stock is currently trading at the midpoint of its 50 and 200 DMA levels, and its RSI Index is 49.15. We have valued the stock using the Price/Book value-based relative valuation methodology and arrived at a target price of USD 14.54. Considering the significant correction in the stock price, we believe the current share price sufficiently reflects the business fundamentals. We have chosen to remain on the sidelines and will reevaluate our view on the stock upon inception of revenue and the outcome of the litigation charges on the company. Therefore, we recommend an "Avoid" rating on the stock at the closing price of USD 16.39, down 0.30% as of July 06, 2021. 

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

Thryv Holdings, Inc.

THRY Details

Thryv Holdings, Inc. (NASDAQ: THRY) offers digital marketing solutions and cloud-based tools to small-to-medium-sized businesses (SMBs) in the United States. Its operating segments are 1) Marketing Services which provides print and digital solutions, like Yellow Pages, Search Engine Marketing (SEM) solutions, Search Engine Optimization (SEO) tools, and other digital media solutions, 2) Software as a Service (SaaS) segment offers SMBs an end-to-end customer experience platform that enables them to receive online payments, and 3) Thryv International, which segment deals in digital marketing and directory services. 

Increasing Dominance of ThryvPay: On June 17, 2021, THRY announced that in May 2021, ThryvPay was the most preferred payment processing option on its platform, among five other available options. ThryvPay exceeded its peers both in terms of volume processed and the number of transactions - it allows business owners to offer installment plans, customizable payment plans, and membership programs to their clients together with fraud prevention, thus making it a more sought after option.

Geographical Expansion through Horizontal Acquisition: On March 01, 2021, THRY completed the acquisition of Sensis Holdings Limited, a marketing solution company serving in Australia, for a cash consideration of USD 215.0 million. This acquisition has added over 100,000 customers to THRY’s client base.  

Q1FY21 Results: THRY reported total revenue of USD 280.61 million for Q1FY21 (ending March 31, 2021) compared to USD 318.57 million in Q1FY20, registering a decline of 11.92% YoY. The Marketing Services segment, which accounted for 81.23% of the total revenue in Q1FY21, decreased 20.50% YoY driven by lower demand for print services and shrinking of client base. Gross profit declined by 9.05% YoY in Q1FY21, which was partially offset by contraction of costs by 200 bps. THRY reported an operating income of USD 64.63 million in Q1FY21 vs USD 61.64 in Q1FY20, up 4.26% YoY aided by a reduction in employee-related expenses. Its net income for Q1FY21 was USD 36.51 million in contrast to USD 28.10 million in Q1FY20, along with a 420 bps increase in the net margin.

Key Risks: THRY operates in a highly competitive industry, any advanced innovation or superior product development by its competitors could impact the company’s operations. In addition, THRY has agreements with several search engines through which it places its clients’ advertisements. Cancellation or alteration of even one such agreement could harm the company’s financials. Furthermore, as of December 31, 2021, Mudrick Capital owned 55.7% of THRY’s common stock thus gaining substantial control over its operations. This constrains the ability of other shareholders to influence corporate decisions.

Outlook:

FY21 Guidance (Source: Investor Presentation, May 13, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

THRY Daily Technical Chart (Source: Refinitiv)

Stock Recommendation: THRY has increased 32.44% and 124.69% in the past 3 and 6 months, respectively, and is currently close to the higher band of the 52-week range of USD 8.10 to USD 37.26. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 51.28. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 28.48. Considering the significant uptick in the stock price, we believe the current share price sufficiently reflects the business fundamentals. We have chosen to remain on the sidelines and will reevaluate the thesis upon further improvement in debt metrics and progression on the growth of the SaaS business. Therefore, we recommend an “Avoid” rating on the stock at the current price of USD 32.58, down 1.99% as of July 06, 2021, at 01.49 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.