Sign InNikola Corporation faces challenges with battery recall, but analysts remain optimistic
Summary
Despite the recent battery recall and negative PE ratio, analysts project an optimistic outlook for Nikola Corporation in the long run due to the market's trend towards greener alternatives, suggesting a 'Hold' position for now and considering a buying opportunity once the current issues are resolved. (August 15, 2023)
Introduction
The analysis encompasses Nikola Corporation (Ticker: NKLA), a company listed on NASDAQ. As of the last close on August 15, 2023, Nikola has been trading at $1.91 with a change of 4.95%. The corporation specializes in electric vehicle technology, particularly electric battery trucks.
Fundamental Analysis
Nikola Corporation holds a market capitalization of $1.37 billion with 716.79 million outstanding shares. The year has so far seen a high and low of $7.01 and $0.52 respectively. The company's last EPS was demonstrated as -1.4, possessing a PE ratio of -1.36 which indicates negative earnings. It's also noted that the average trading volume stands at 83.15 million while the volume of the last session was registered at 35.44 million.
Despite the not-so-optimistic figures, the consensus among the analysts prevalent in the market is a 'Buy'. However, we should also take note of the fact that their target price ranges from $8 to $12, considerably higher than the current price. Additionally, troubles have risen for Nikola investors due to its voluntary recall of 209 electric battery trucks.
Technical Analysis
The technical indicators provide a mixed picture for Nikola. While it has remained above its 50-day Moving Average at $1.70, the price is marginally below its 200-day Moving Average indicating a lack of long-term momentum. The resistance and support levels are placed at $1.94 and $1.82 respectively, with the stock trading in between. An Average True Range (ATR) value of 18.96, a volatility measure, suggests significant price movements. Moreover, the MACD (3-month) value of 0.3 and RSI14 at 45 suggest the possibility of upwards price trend.
News and Events
Turning to recent news, we need to consider a potentially negative influence on Nikola. It appears that the company has conducted a recall of all its battery-electric trucks due to battery pack defects increasing safety risks. Nevertheless, Nikola maintains that it possesses sufficient cash to run operations till 2024.
Future Predictions
As for the next trading day, August 16, 2023, given the current trending of the market, a marginal increase in price is anticipated. However, the voluntary recall of its battery trucks may weigh negatively on potential investors' sentiments leading to higher price volatility during the week. Therefore, a cautious trading approach is recommended for the upcoming week. If Nikola can effectively handle its battery issues and provide solutions, however, the "Buy" consensus among analysts may drive the price upward swiftly.
Evaluation
Subject to potential risks and challenges in the short-term, including the battery recall, and despite the negative PE ratio, analysts project an optimistic outlook in the long run due to the market's trend towards greener alternatives. Hence, the decision would be to hold the Nikola stock for now until resolving the battery issues, and then consider buying as per the analysts' consensus. This suggestion for 'Hold' is grounded in the possibility of the stock descending further, providing a favorable buying opportunity once the current issues are resolved, and the reassertion of a green agenda drives the market upwards. Thus, a keen balance needs to be maintained for informed trading decisions concerning NKLA.
