Nikola Corporation stock forecast: slamming the brakes?
The stock is not expected to return to highs seen in June 2020, though analysts remain upbeat
The Nikola stock (NKLA) forecast has been rocked by several extraordinary developments. The electric truck brand, which burns cash at a rate of knots and has failed to generate revenue for most of its four years in existence, had been a popular pick for investors who fancied it as a compelling rival to Tesla.
Unfortunately, if you’ve seen Nikola on the stock market, you’ll know that this all started to unravel in September 2020. Hindenburg Research, a short seller, extraordinarily alleged that the firm is an “intricate fraud”, and claimed to have “extensive evidence” that its core technology was actually bought from another company.
The damning report also questioned the past business activities of founder Trevor Milton, who responded by resigning as executive chairman. “The focus should be on the company and its world-changing mission, not me. I intend to defend myself against false allegations levelled against me by outside detractors… I will be cheering from the sidelines,” he said at the time.
But the worst was yet to come, in July 2021, when the US Department of Justice charged him with securities and wire fraud.
‘The focus should be on the company and its world-changing mission, not me. I intend to defend myself against false allegations levelled against me by outside detractors… I will be cheering from the sidelines.’
It’s likely that all of this drama could get in the way of Nikola’s bold ambitions of becoming as big as Tesla and cementing its place as a major player in the newfound world of electric vehicles.
Whereas Tesla is focused on electric cars, and bringing them to consumers, Nikola has grand designs of delivering the same for trucks. If successful, the ramifications of this could be huge, making road haulage far more environmentally friendly than it is now. However, it’s difficult to gauge the feasibility of this product because they are yet to go on sale.
Here, we are going to look at whether Nikola stock is a buy or not, and try to figure out when we could see this company’s trucks on the road.
Nikola stock news
Things started to get interesting in the Nikola Corporation stock forecast. Shares suddenly surged ninefold to hit highs of $93.99 – pretty staggering for a business without any business. It is entirely possible that the brand was riding on Tesla’s coat-tails, given how the Elon Musk-led company had seen its shares more than quadruple since the first quarter of 2020.
But those who bought Nikola at this level, perhaps because of the fear of missing out, will have ended up licking their wounds. The Nikola share price forecast was thrown into disarray after shares crashed. It is difficult to pinpoint exactly why this happened initially but some analysts say that unrealistic projections from Milton certainly would not have helped matters. Back in July 2020, he had proudly proclaimed that future revenues of $200m (£156m, €170m) per day were possible. Although the firm was receiving thousands of deposits a day from truckers who wanted to reserve a vehicle, this may not translate into sales.
A significant development in Nikola stock news came when the manufacturer announced plans to raise new capital by selling 23.9 million new shares. Understandably, this left existing investors rather disgruntled, because it effectively waters down the value of their current holdings. After that prospectus was filed, the company’s shares fell through the floor: at one point, they were down 21% in a single day of trading. Not good.
Now, following on from the Hindenburg report, Milton’s resignation and the US charges, NKLA is a fraction of its all-time highs, falling to $11.16 at the time of writing. Hopes that the Nikola stock would continue to rise seem fanciful now but, despite the turmoil, those who believe in the company’s technology and business model believe things could get exciting in the long-term. Advocates point to how the fuel-cell version of Nikola’s flagship Badger truck could end up having a range of 600 miles, with batteries and hydrogen gas ensuring that hauliers have plenty of juice to get them from A to B.
In March 2021, JP Morgan analyst Paul Coster curbed his enthusiasm. He dropped his target from $33 to $30 per share, but looked forward to a prototype and initial orders to boost fortunes. In May 2021, BTIG’s Gregory Lewis gave it an $18 price target, pointing to the Tre battery truck’s potential in the heavy-duty truck market and the hydrogen fuel cell Two when it is delivered in 2023. On 14 October, NKLA announced PGT Trucking Inc would lease 100 Tre heavy-duty fuel cell electric vehicles. NKLA also has an innovative partnership with pipeline company TC Energy of Calgary, Canada to collaborate on hydrogen fuelling hubs over the next five years.
Nikola stock forecast: a challenging set of results
In an August earnings presentation, NKLA reported a $263.455m year-to-date loss. It had deployed the first batch of five Alpha trucks and built the second batch of nine Beta trucks. It also forecast between 25 and 50 vehicle deliveries by year end. The company also said it expected to complete phase 1 of its Coolidge, Arizona factory by year-end. Meanwhile, it signed up dealers in nine states. Net loss of $263.45m year to date. It also forecast between 25 and 50 vehicle deliveries by year end.
The report was decidedly more modest than August 2020, when the company heralded an order for 2,500 all-electric garbage trucks from Republic Services, with an option to build another 2,500. Milton said that the order was worth between $1bn and $2bn.
It was a short-lived relationship. Two days before Christmas, NKLA and Republic Services announced their collaboration was over. NKLA said the new technology and design would result in “longer than expected development time, and unexpected costs”. So much for ramping up production at the Arizona factory, which NKLA hopes can someday pump-out 35,000 vehicles a year.
Let’s finish up by taking a look at the wider Nikola stock prediction. According to CNN Business, a consensus of 10 analysts resulted in a hold rating. Two of the analysts have a buy rating for NKLA, while one urges to sell. Eight analysts set the median target at $13 for NKLA, with a high of $24 and low of $9 within the next 12 months.
What remains to be seen is whether Milton’s departure and legal problems affect the views of other analysts. Per his recommendation, he was replaced as executive chairman by Stephen Girsky, a seasoned executive who previously served as vice chairman at General Motors (GM). GM snapped up an 11% stake in Nikola – and it was announced that the legacy manufacturer would be responsible for producing the Badger pickup truck by the end of 2022. But GM put the gear in reverse and backed out of the $2bn equity deal.
Not for the short-term, due to turmoil at the top and legal issues. It is strictly a long-term play. The push to electrify vehicle fleets positions Nikola well, as long as the company can resolve the challenges it faces.
According to CNN Business, a consensus of 10 analysts resulted in a “hold” rating. Two analysts gave a buy rating for NKLA and one said sell. Eight analysts set the median target at $13 for NKLA, with a high of $24 and low of $9 within the next 12 months.
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