Nikola Corporation

Nikola Corporation (NASDAQ: NKLA)  designs and manufactures zero-emission battery-electric (BEV) and fuel cell electric (FCEV) vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen station infrastructure.

Key Highlights

• NKLA did not report any revenue in Q1FY21 (ended March 31, 2021) from the electric vehicle business. It previously generated revenue from solar installation projects, which ceased operations in FY20.
• Net loss for Q1FY21 expanded to USD 120.22 million from USD 33.15 million in Q1FY20.
• Negative Q1FY21 ROE of 12.7%, whereas the industry median stood at 3.3%.
• As announced on July 15, 2021, NKLA added five independent dealers with over 51 locations in 9 states as part of its strategy to expand sales and service coverage for Class 8 trucks.
• On July 29, 2021, the company’s founder and former CEO Trevor Milton was found guilty of misleading its investors and making false statements regarding its business prospects.
• Stock is currently trading below its crucial long-term and short-term support levels of 50-day and 200-day SMA levels, a bearish indicator.
• NKLA’s share price decreased 48.59% and 35.17% in the past 6 and 9 months, respectively.

Technical Price Chart (as of July 30, 2021). Analysis by Kalkine

Conclusion: NKLA is a zero revenue company and its operating performance further deteriorated in Q1FY21. Hence, given the sharp decline in stock price, lackluster fundamentals, litigation charges, we recommend an “Avoid” rating on the stock at the closing price of USD 11.87, down 1.33% as of July 30, 2021.

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

HUYA Inc.

HUYA Details

HUYA Inc. (NYSE: HUYA) serves China's active game live streaming community as a live streaming gaming platform. HUYA builds e-sports live streaming, one of the most popular content genres on its platform, via close collaboration with e-sports tournament and gaming event coordinators, prominent game designers, and licensors. Most of HUYA's revenue comes from selling virtual products on live streaming platforms and other services, including advertising and online game-related services. Its open platform also serves as a marketplace where broadcasters and talent agencies may meet and cooperate directly with the company. As of July 30, 2021, the company has 236.24 million American Depository Shares (ADS) listed and outstanding (each ADS representing one Class A ordinary share).

Termination of DouYu Merger Agreement: Following an antitrust review by China’s State Administration for Market Regulation (SAMR), HUYA announced, on July 12, 2021, SAMR’s decision to prohibit its proposed merger with DouYu International Holdings Limited (DouYu), China's leading provider of game-centric live streaming platforms. In light of SAMR’s decision, the merger agreement was terminated with immediate effect. Tencent Holdings Limited (Tencent) is a major shareholder in both companies.

Q1FY21 Results: The company reported an 8.0% rise in total net revenue in Q1FY21 (ended March 31, 2021) to RMB 2.60 billion, compared to RMB 2.41 billion in Q1FY20, primarily driven by the enrichment and enhancement of content, products, and services. In addition, net income attributed to common shareholders increased to RMB 185.54 million in the quarter vs. RMB 172.23 million in the year-ago period. In addition, the average mobile Monthly Average Users (MAUs) of Huya Live increased to 75.5 million in Q1FY21 vs. 74.7 million in Q1FY20.

Key Risks: The Chinese authorities' recent crackdown on its US-listed businesses and the consequential possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country’s exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm. Further, as of March 31, 2021, Tencent held 69.7% of the total voting power in the company. This concentration of ownership and voting power can limit the minority shareholders’ ability to influence corporate matters.

Valuation Methodology: Price/Earnings per share 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.

HUYA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HUYA’s share price fell 50.95% in the past six months and is currently leaning towards the lower end of the 52-week range of USD 11.71 to USD 36.33. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 32.24. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 14.94. Considering the significant correction in the stock price, increasing demand for online streaming platforms, a consistent increase in MAUs, China's crackdown, and other associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 12.70, down 0.70% as of July 30, 2021, at 2:02 PM ET.

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

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.