Sign InNikola Corporation's Stock Shows Potential for Short-Term Recovery but Raises Long-term Concerns
Summary
As of August 25, 2023, Nikola Corporation's stock closed at $1.31, showing an increase from its previous close, and while technical indicators suggest a potential rebound, the negative EPS, recall issues, and current downtrend raise concerns for long-term investment, prompting a recommendation to hold the stock and monitor for further buy signals.
Technical Analysis
As of August 25, 2023, Nikola Corporation's (NKLA) stock closed at $1.31, registering an increase of $0.07 (6.94%) from its previous close. The volume traded was 66.36 million shares, which is below the average volume of 85.25 million shares.
Given the current price, Nikola's one-year trading range has varied widely from $0.52 to $6.29, indicating significant volatility. The stock is currently trading much closer to its 52-week low point.
In terms of key technical indicators, NKLA has an RSI14 of 18, well below the standard 30 level, indicating a near-term oversold condition. This could signal a potential rebound in the stock price. However, the MACD (3-month) is -0.22, suggesting a bearish trend.
The 50-day and 200-day moving averages are $1.86 and $1.83, respectively, both considerably above the last closing price. This implies that the stock is in a robust downtrend. The stock has immediate support at $1.19 and resistance at $1.38.
Fundamental Analysis
Nikola Corporation has a market capitalization of $1.12 billion and a negative earnings per share (EPS) of -$1.27, giving it a negative price-to-earnings (PE) ratio of -1.03, which raises concerns about profitability.
The consensus analyst target for NKLA is $10, with a low-end estimate of $8 and a high of $12. If these targets are met, it could represent a substantial return potential.
However, recent news surrounding a costly recall of Tre electric trucks appears to have adversely affected the stock. This setback, combined with battery pack repairs that present a fire risk, may explain NKLA's poor recent performance.
On the positive side, the California State Teachers' Retirement System (CalSTRS) increased its investment in NKLA, indicating confidence in its long-term prospects. Furthermore, despite the current struggles, NKLA's new CEO reaffirmed their commitment to releasing hydrogen semis within the year.
Stock Forecast and Evaluation
Given the oversold condition and the lower-than-average trade volume, short-term price recovery may be expected. Predicting the next trading day (August 28, 2023), the stock could see slight upward movement respecting the resistance level, with a price forecast of $1.32-$1.35 per share.
For the upcoming week, the price could potentially touch the resistance level at $1.38, assuming positive market sentiment and no further damaging company-specific news.
However, considering the negative EPS, recall issues, and current downtrend, NKLA as a long-term investment raises concerns.
Based on the provided data and current circumstances, it is recommended to Hold the stock. Investor decisions should rely on Nikola's ability to navigate its current issues and execution of its broader strategy, as well as monitoring for further buy signals from technical indicators.
