Sign InSummary
Nikola Corporation's stock price experienced a significant increase on July 31, 2023, and with recent positive news and an undervaluation indication, it may be a cautious buy for potential investors, although caution is advised due to overbought conditions and increased volatility.
Fundamental Analysis
Nikola Corporation, traded under the ticker NKLA on NASDAQ, experienced a significant leap in its stock price at close on July 31, 2023, finishing at $2.67, which represented a notable increase of 17.62% ($0.40).
The company, currently showcasing a market cap of $1.91 billion, endured significant trading activity on the day, with a volume of 144.35 million shares traded. This volume far exceeded the average volume, typically around 67.82 million shares.
A closer look at Nikola's earnings per share (EPS) figure of -$1.4 coupled with a negative price-to-earnings (PE) ratio of -1.91 reflects an underperformance in generating profits. Despite this, recent news suggests an optimistic outlook for the company. Nikola has finalized a sales agreement with a reputable freight company and plans to deliver the first trucks for the order as soon as next month. Deals of this nature could positively impact future earnings.
Interestingly, the discounted cash flow (DCF) value is estimated at $3.20, suggesting the stock may be undervalued. Finally, it should be noted that Nikola's next earnings announcement is due on August 4, 2023, a potentially key date for investors following the company.
Technical Analysis
Turning to technical indicators, Nikola's 14-day relative strength index (RSI) stands at 72, hovering just above the common threshold of 70 which normally indicates overbought conditions. That said, the overbought condition might not necessarily lead to a price decrease as the momentum can drive the stock price higher, although it does indicate heightened risk.
The company's recent closing price surpasses both its 50-day moving average of $1.31 and its 200-day moving average of $1.92, which may suggest a strong recent performance and bullish sentiment among traders.
The Moving Average Convergence Divergence (MACD) for three-month stands at 0.441695, signaling bullish momentum.
Price Prediction
With the recent announcement of Nikola's sales agreement with a major freight company, sentiment towards NKLA could likely remain positive for the next trading day, on August 1, 2023, and potentially the following week. While it cannot be definitively projected, the stock price may continue to rise.
The consensus target provided is $10, with the analysts' targets ranging from a low of $8 to a high of $12. Though these targets seem optimistic compared to the current stock price, the recent deal announced by the company may serve as a catalyst to approach these targets in the long term.
Conclusion: Buy, Hold or Sell?
While Nikola's fundamental metrics could be concerning due to its negative earnings, recent pivotal deal announcements and its current undervaluation regarding DCF present an optimistic future for the company. With the stock trading above both its 50-day and 200-day moving averages, it may be considered for a buy.
Notwithstanding, Nikola's RSI of 72 calls for caution as it signals overbought conditions. Investors should be prepared for increased volatility that might present both risks and opportunities. As such, for investors currently holding NKLA, a hold strategy may be recommended considering the upcoming earnings announcement and potential for future growth signaled by the truck sales agreement.
To conclude, while it may not be an entirely straightforward decision due to the mixed signals, NKLA is cautiously recommended as a Buy. Potential investors must pay careful attention to upcoming news, such as their earnings announcement scheduled for August 4, 2023.
