The bad news keeps piling up for EV truck maker Nikola (NKLA). You could darkly suggest if the company had any of the trucks it has yet to build at its disposal it could load all the negative sentiment and drop it off somewhere out of reach.
But in addition to not having any product, it is now without its founder too, after Trevor Milton resigned earlier this week. It is now also without the support of Wedbush analyst Daniel Ives. While previously Ives’ support was only muted and underpinned by calling Nikola a “prove me” stock, the latest developments have resulted in a downgrade.
Ives’ rating drops from Neutral (i.e. Hold) to Underperform (i.e. Sell), while the price target is severely slashed from $45 to $15. This figure implies a 21% downside from current levels. (To watch Ives’ track record, click here)
Ives’ downgrade is due to two main reasons. First, Milton and Nikola are inseparable just like Musk and Tesla. After Milton was accused in a report by short seller Hindenburg Research of duping investors, Ives was quick to defend the colorful founder, citing the recent General Motors deal as proof an industry heavyweight could potentially be in the making. The 5-star analyst suggested investors give Nikola more time to execute Milton’s grand vision. Essentially, Ives believes Milton’s departure denies Nikola its X factor.
“Despite the controversy and noise surrounding Milton, he was the visionary, architect and internal/external force driving Nikola for the coming years and we believe he leaves a huge void that is hard to replace,” Ives said.
Ives’ second reason for withdrawing support is more to do with recent external developments. Despite investors disappointment with Tesla’s Battery Day, Ives counts Tesla’s plans as a harbinger of things to come in the EV sector.
“We believe with some of the eye popping battery innovations coming out of Tesla looking to reduce battery costs well below the $100/kWH threshold, this potentially changes the game with further price parity on the EV front and throws a wrench in the ROI story around hydrogen fuel cell vehicles over the long term,” Ives commented.
So, that’s the Wedbush View, what does the view on Nikola look like from the other side of the Street?
NKLA currently has a Hold consensus rating based on 2 Buys and Holds, each, and Ives’ newly minted Sell. Interestingly, the average price target of $37 could still yield returns of 93% in the coming year. However, look out for any changes in analysts’ models over the coming days. (See NKLA stock analysis on TipRanks)
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