Friday, 10 May 2024

1 Wall Street Analyst Thinks Nikola Stock Is Going to $0.50. Is It a Sell Around $0.58?

by BD Banks

The electric vehicle (EV) industry has had quite a few struggles, and one of the biggest individual strugglers has been Nikola (NASDAQ: NKLA). Beset by a host of troubles, some of its own making, the battery EV (BEV) and fuel cell EV (FCEV) truck maker’s shares have fallen into penny stock territory.

At the beginning of May, one prognosticator tracking Nikola’s stock cut his price target exactly in half. Interestingly, though, he’s not necessarily bearish on its prospects.

50% price target chop

The person behind that deep cut was TD Cowen’s Jeffrey Osbourne. He reduced his Nikola price target to $0.50 from the previous $1.00. Although that new level implies 14% downside from Thursday’s prices, Osbourne maintained his existing hold recommendation on the EV stock.

That move came just after Nikola published its first-quarter results. Its revenue fell by a queasy 29% year over year during the period, to just under $7.5 million. Net loss narrowed, which was slightly encouraging, but it was still deep in the red at nearly $148 million.

Operationally speaking, the company did manage to ship more trucks, but we’re dealing with low numbers here (40 during the quarter, versus 31 in the same period of 2023). Production fell to 43 trucks, against 63 the year before.

In his latest analysis, Osbourne pointed out that Nikola will need more time to increase its volume and deepen (or forge) relationships with suppliers. It also plans to expand nationally from its base in California, and be flexible about pricing in order to win more customers.

A laggard in a slowing industry

With declining sales growth in recent months and plenty of competition, the EV sector’s potential isn’t as high as it once seemed. Nikola is unarguably a laggard, and with other companies selling EV trucks now, any advantage it once enjoyed as a first mover has long since evaporated. Production and sales numbers are weak, and the finances look increasingly bad. I think this stock is a Hail Mary play at best, and not a buy even at its ground-level price.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.