Sign InNikola Corp Shows Potential Amidst Unprofitability and High Volatility
Summary
As of July 17, 2023, Nikola Corporation's stock experienced a slight increase of 3.56%, and despite being unprofitable and included in a list of penny stocks to potentially avoid, the company shows signs of future potential through new partnerships and investments, with technical indicators mixed but suggesting an upward trend and potential substantial upside.
Introduction
The focal company for this analysis is Nikola Corporation (NASDAQ: NKLA), a US company within the alternative energy vehicles industry. The stock closed at $2.33 as of July 17, 2023, and experienced a change of $0.08 equivalent to a 3.56% increment.
Fundamental Analysis
Nikola's financial year is presented by its highs and lows, placing the low at $0.52 and the high at $8.97. The high shows almost a seventeen-fold increase from the lowest point, indicating substantial volatility throughout the period. The company's market capitalization stands at $1.67 billion, which is considered a small cap.
The company has an EPS of -$1.74, suggesting that it is not currently profitable. Further, a PE ratio of -1.34 confirms this assessment, which can be viewed as a red flag by potential investors. The company has an outstanding share of 716.79 million.
In the recent news, Nikola Corporation signed a contract with BayoTech, which boosted the stock substantially as it was considered a green flag for future business potential. However, other news articles pointed out penny stocks that investors should potentially avoid, with Nikola being one of the mentioned. Additionally, Nikola's partnership with Bosch with a $2.5 billion investment projects a promising future for the company if it can utilize this investment to realize commercial success effectively.
Technical Analysis
Nikola's technical analysis shows the stock currently trading above its 50-day and 200-day moving averages, which are $1.02 and $1.99, respectively. A pattern suggesting the stock is currently on an uptrend.
The stock's RSI14 stands at an overbought reading of 86, indicating that the stock might be overpriced, and a correction could be on the horizon. This reading is usually a bearish signal. The MACD of 0.24 further supports this trend, suggesting strong recent upward momentum.
Future Stock Price Prediction
Using the provided Discounted Cash Flow (DCF) value of $2.86, it indicates that the fair value of the stock is slightly above the last close price of $2.33. Furthermore, the target median and consensus stock price predict are $10, implying a potential massive upside.
Conclusion
In conclusion, despite Nikola's unprofitability and inclusion in a list of penny stocks to potentially avoid, there are signs of future potential driven by new partnerships and investments. The technical indicators are mixed, and while the stock appears overbought, it also appears to be on an upward trend, and the DCF and target stock prices suggest potential substantial upside.
However, prospective investors should be prepared for significant volatility and consider the inherent risk associated with investing in unprofitable companies. Nikola Corporation stock can be viewed as a "Hold" due to the recent positive news and partnerships mitigating some risk, but it remains speculative due to the unprofitability and high volatility. Potential investors should approach with caution, and current investors might want to consider securing profits or setting stop losses to guard against potential downturns.
