The sell-off in Nikola Corporation NKLA 1.88% since the Hindenburg Research report accusing the company of being an “intricate fraud built on dozens of lies” took a breather on Friday. Investors must now decide if the fraud allegations and the departure of chairman Trevor Milton is a long-term buying opportunity or if the worst is yet to come for the stock.

The Bull Case: 

Earlier this week, Cowen analyst Jeffrey Osborne defended Nikola. Osborne said investors should understand that the optics of Milton’s departure are terrible for the stock in the near term, but the resignation will help minimize distractions in the longer term.

“We believe Steve Girsky at the helm of the Board and Mark Russell and Kim Brady controlling the communications and narrative from management will set a more measured and less promotional tone with investors,” Osborne wrote in a note.

Osborne said he has known the Nikola team for nearly three years and he doesn't believe the company is a fraud. However, investors should understand it will take the company some time to build back investor trust.

Osborne said Nikola’s partnership with General Motors Company GM 0.38% was a major milestone for the company, and Cowen is anticipating production of Nikola’s battery electric vehicles to begin in the fourth quarter of 2021.

The Bear Case:

Wedbush analyst Daniel Ives downgraded Nikola and said there are two reasons why risk for the stock is to the downside.

First, Milton was the visionary for the company, and his departure changes the story moving forward and leaves a visibility void that will be difficult to fill. Second, Ives said the battery cost projections from Tesla Inc TSLA 5.04% at this week’s battery day suggest hydrogen fuel cell vehicles could have a pricing problem in the long-term.

Ives believes GM will maintain its production partnership with Nikola and the company will begin delivering battery and fuel cell EVs in 2023. However, he said Nikola will likely face more bumps in the road between now and then.

“Overall we still believe the company's EV and hydrogen fuel cell ambitions are attainable in the semi-truck market, although we have serious concerns that the execution and timing of these ambitious goals stay on track over the coming years,” Ives wrote in a note.

The Stock Price: 

Cowen has an Outperform rating and $79 price target for Nikola, while Wedbush has an Underperform rating and $15 target. The stock trades around $19.79 at the time of publication.

Related Links:

Experts React To Nikola Sell-Off: 'It's Not Too Late To Get Out'

Tilson Says Nikola's Trevor Milton Will Land 'Behind Bars For Securities Fraud'