Sign InNikola Corporation (NKLA): A Hold Amidst Mixed Outlook and Volatile Market Sentiment
Summary
Nikola Corporation (NKLA) is experiencing a sustained downtrend with a closing price of $1.02 on October 20, 2023, and negative earnings per share, but positive opinions from analysts and a target price of $10 offer potential upside if the company can improve its earnings capacity and stabilize its operations. The stock is oversold according to the Relative Strength Index (RSI) and could experience increased volatility leading up to the earnings announcement on November 2, 2023. The current recommendation is to hold off on making any investments until more information is available. (Analysis conducted on October 20, 2023)
Fundamental Analysis
Nikola Corporation (NKLA) had a closing price of $1.02 on October 20, 2023. This figure is below its 50-day and 200-day moving averages, which stand at $1.35 and $1.58 respectively, showing that the stock has been in a sustained downtrend.
Weighing on the company's performance is a negative earnings per share (EPS) of $-1.45, which reflects lower profitability. Moreover, its price-to-earnings (PE) ratio stands at $-0.66, calling into question the company's earnings capacity.
However, it's important not to overlook the positive opinions from analysts. The company's consensus from market analysts is a "Buy". Additionally, the median target price stands at $10, which offers a sizable upside potential from the current price levels.
Given the company's market cap of $940.47 million and a large volume of shares outstanding (9.85 billion), the price movements are gradual and usually predictable. However, the large volume also makes the company susceptible to volatile price swings due to substantial selling or buying pressure.
Technical Analysis
The Relative Strength Index (RSI) is currently at 24, which signals that NKLA is oversold and could be due for a bounce. However, this must align with other positive factors to create a favourable buying condition.
The Moving Average Convergence Divergence (MACD), a trend-following momentum indicator, is currently at 0.04, which is moderately positive but not convincingly bullish.
The Average True Range (ATR) is at 14.57, signaling high volatility in the stock price. The support level stands at $0.91, and resistance is at $1.15. Breaching any of these levels could lead to substantial price movements.
Company Developments
Recent news on the company is a mixed bag. Nikola is seen gearing up to restart its Battery Electric Vehicle (BEV) business and ramp up the production of Fuel Cell Electric Vehicles (FCEVs) - potential positives for the stock. However, there are also concerns about the company's operational stability, with voices of caution about a possible inability to retain a stable CEO as the balance sheet deteriorates and fears of dilution due to an issuance of new shares.
Outlook and Prediction
Given the current information and the upcoming earnings announcement on November 2, 2023, the stock is expected to experience increased volatility. The pessimistic sentiment is quite strong, but this could turn around with a solid earnings report or positive corporate announcements.
For the next trading day on October 23, 2023, the stock price is likely to continue its downward trend unless new developments buoy the market sentiment.
Looking at the broader picture, NKLA's price could start to recover in the upcoming week if the earnings announcement is favorable and helps to alleviate some of the concerns surrounding the company's stability and potential share dilution.
Evaluation
Given the prevailing market sentiment and the upcoming earnings announcement, it might be prudent to place Nikola Corporation (NKLA) as a HOLD for now. Investors should closely monitor the company's upcoming earnings report and corporate announcements before creating a new position in the stock. It's wise to observe how the stock responds to these new developments and how market sentiment evolves before making an investment decision.
