By
Steve Muchoki
May 9th, 2024
The JPMorgan analyst lowered his price target for Nikola stock on execution risks related to a “tarnished brand.”
On the 28th of December, Nikola Corporation (NASDAQ: NKLA) stock advanced over 19% despite bearish comments from analysts at JPMorgan Chase & Co (NYSE: JPM). Currently, Nikola is trading at $16.77 in the pre-market. The current trading price is a 2.2% loss over its previous close of $16.40.
Bearish Note by JPMorgan
Since the beginning of the year, Nikola has been making headlines and recording mostly losses. However, Nikola stock recently increased in spite of negative notes from analysts at JPMorgan. JPMorgan analyst, Paul Coster, reduced his price prediction on Nikola from $40 to $35 per share. The analyst lowered his price target on execution risks related to a “tarnished brand.”
Notably, Coster’s price target is about 100% gain over Nikola’s current trading price.
The analyst is also optimistic that Nikola’s shares may rebound from losses in the coming year and keeps his overweight rating on NKLA. Come 2021, Coster believes that news on Nikola should be “less drama-filled” and “turn generally positive.” He is also optimistic that Nikola will make significant progress on the developments of its hydrogen fuel-cell powered trucks in the coming months.
Nikola Stock Declines
Nikola stock has dropped about 50% following the cancellation of a $2 billion investment from General Motors Company (NYSE: GM). In reaction to the cancellation news, Nikola dipped nearly 25% on the 30th of November.
Nikola signed a non-binding Memorandum of Understanding (MOU) with General Motors in replacement for the canceled agreement. The deal allows General Motors to supply its Hydrotec fuel-cell system to Nikola for Nikola’s commercial semi-trucks. GM would integrate its Hydrotec fuel-cell technology into Nikola’s Class 7 and 8 semi-trucks.
Before the $2 billion investment call-off from General Motors, Nikola also recorded losses in its stock following the resignation of the company’s founder and chairman Trevor Milton. The chairman has been under pressure after Hindenburg Research accused Nikola of being “an intricate fraud built on dozens of lies.”
Hindenburg noted that there are recorded phone calls, text messages, and emails that can serve as evidence to prove several false statements by Milton. Shortly after Hindenburg Research published the report on Nikola revealing that the company is deceptive, NKLA plunged 10%.
When Nikola’s founder and chairman resigned from his role amid the allegations, the company dipped further by 25% in premarket trading.
In addition to recent losses, Nikola shed another 10% after the company announced its contract cancellation with Republic Services (NYSE: RSG). In August, Nikola entered into an agreement with Republic Services for the production of 2,500 garbage trucks.
Wedbush analyst Dan Ives who has a $15 price target on Nikola, commented on the contract termination. He said:
“In a nutshell, this is a gut punch for investors that were hoping this monster order was a potential paradigm changer for Nikola and reference customer going forward.”
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