Sign InNikola Corporation's Stock Shows Volatility, Raising Concerns Despite Positive Analyst Outlook
Summary
Nikola Corporation's stock is heavily oversold and may be due for a correction, with a predicted bounce back on the next trading day and a potential trading range of $1.45 - $1.50 for the upcoming week; analysts recommend holding onto the stock despite negative news and undervaluation. (August 23, 2023)
Overview
Nikola Corporation (NKLA) is a US-based company listed on the NASDAQ exchange that primarily operates in the electric vehicle sector. On August 23, 2023, the stock closed at $1.32, with a market capitalization of 1.12 billion and 910.6 million shares outstanding. The company's last earnings per share (EPS) was reported to be -1.05, leading to a negative Price to Earnings (PE) ratio of -1.17. The company's stock has been volatile recently, with a previous day decline of -7.04%.
Technical Analysis
NKLA's RSI14 stands at 9, indicating the stock is heavily oversold and could be due for a correction. The company’s 200-day moving Average at $1.84 is substantially higher than the 50-day moving average of $1.85, indicating a downtrend in the share price over the medium term. The share price needs to break its resistance level of $1.38 to initiate a near-term recovery, with the nearby support level resting at $1.19.
The MACD (3-month) of NKLA is showing a negative value (-0.086), suggesting a selling tendency over the past three months. Nikola's Average True Range (ATR) of 24.40 indicates the stock's high volatility, implying larger changes in its price on a daily basis than a less volatile counterpart.
Fundamental Analysis
Nikola has a negative EPS of -1.05, which suggests the company is not profitable, contributing to the negative PE ratio of -1.17. The company also faces negative news regarding its battery trucks recall due to possible fire concerns and new convertible notes deal, which may affect the company's financial stability and future growth prospects negatively. Moreover, the company’s decision to issue $125 million in new convertible notes to a division of New York-based hedge fund 3i Management LLC has raised serious concerns, as the debt terms incentivize noteholders to short the company's stock.
Future Predictions
The discounted cash flow (DCF) estimated a fair value of $1.75 for NKLA, which suggests the stock is slightly undervalued compared to its current market price. Furthermore, analysts seem to have faith in the company's future, with the consensus price target being $10, significantly higher than the current price. The analyst recommendations show a strong "Buy" consensus.
Next Trading Day & Upcoming Week Predictions
Due to the oversold situation, as indicated by the RSI14 at 9, NKLA might experience a technical bounce back on the next trading day, August 24, 2023 with a predicted closing of $1.39. Similarly, considering the DCF and the negative sentiment surrounding the company with recent news, the stock might trade at around $1.45 - $1.50 the upcoming week, assuming market conditions remain unchanged.
Final Evaluation
Based on the data, NKLA's stock appears to be a "Hold". Despite recent negative news related to battery recalls and questionable financial maneuverings, analysts seem to have faith in the company, and the stock appears to be undervalued based on the DCF assessment. However, its current volatility and negative profit earning calls for investors to be cautious. Therefore, existing investors should hold onto the stock while keeping a close watch on future developments.
