JPMorgan Slams Brakes on Nikola's Stock

Nikola, the electric vehicle startup with no functional or sellable product to back up its insane valuation, just got a reality check from JPMorgan. The Wall Street firm has warned investors of a pullback of the company’s sky-high share price — an action that pretty much guarantees that exact outcome.

After catapulting into the stratosphere two weeks ago, Nikola’s stock stands to sink by nearly a third, the bank warns. That result would no doubt be gratifying for those annoyed by overvalued companies who promise investors the sun, moon, and stars.

A fresh face on the Nasdaq, Nikola made headlines for wooing Wall Street with promises of battery- and hydrogen-driven semi trucks and a full-size EV pickup built with the help of an unnamed (nonexistent?) automaker. On Friday, June 5th, the company’s stock price hovered just under $36 per share. By the following Tuesday, Nikola Corp. was trading for just under $80.

Nikola now sits around $66, with a market cap of $24 billion, despite the company forecasting not a single cent of revenue in 2020 and production vehicles not arriving on the scene for another few years. An American assembly plant is projected for 2028.

In a note Monday, JPMorgan saddled the company with a “neutral” rating and a price target of $45, which is a 32-percent decline from Friday’s close. The early excitement can’t last, it said, adding that Nikola isn’t immune from the hurdles facing other startups.

That said, JPMorgan liked what it saw in Nikola’s plans, assuming the company can pull it off.

“NKLA is poised to disrupt the transportation industry with rapid deployment of hydrogen infrastructure and FCEV powered vehicles for use on long haul trucking routes, reducing CO2 emissions meaningfully and positioning the firm for a key role in the future hydrogen economy,” JPMorgan analyst Paul Coster and co. wrote in the note.

“The resulting business model could be compelling, however risks are elevated for this pre-revenue company, and the stock looks fully valued here, so we look for a pull-back or incremental positive developments to get more constructive.”

JPMorgan forecasts earnings before interest and taxes of $1.5 to $2.0 billion and nearly $14 billion of revenue “as early as 2027,” and a “strong cash flow” into the next decade.

While Nikola’s share price initially wobbled downward, it has since recovered, up a fraction of a percent over Friday’s close.

[Source: Seeking Alpha] [Image: Nikola]