JPMorgan Slams Brakes on Nikola's Stock

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

More by Steph Willems

Join the conversation
2 of 15 comments
  • Myllis Myllis on Jun 25, 2020

    It's not question of the lenght in Scandinavia, question is cost-efficiency. Nose feets means more weight, more fuel consumption, visibility and econimically it's waste of feets. Cab trucks can take more payload which means more money and it's huge diffrence if your payload is 40 ton than 115 ton when you look your check. Plus it's enviromentally-friendly drive maximum payloads. Finnish truckmaker Sisu launched last year hybrid Polar series, which means big drops of emissions, fuel consumption and still it's has 930hp. You should not disapprove cab models, before your have drive in a proper one.

  • Myllis Myllis on Jun 25, 2020

    Sisu videos timber Sisu, why Cab is so superior

  • FreedMike Depends on the used car. If we're talking a numbers-matching GTO or something like that, then hell no. But if we're talking about something like a six-banger '67 Mustang, it'd be cool to make it into an EV with modern suspension, brakes and electronics. Call it an electro-restomod.
  • Billccm I think history is repeating itself. In the late 1980s the French acquired AMC. They discovered no easy money in that deal, Chrysler took AMC and Jeep is all that remained.Present day the French acquired FCA, discovered no easy money in the deal, and some Asian manufacturer will take what remains of Chrysler, and Jeep and RAM will be all that survived.To understand the future study the past.
  • Jalop1991 "why did the governor veto a bill to give me free gummint money?"
  • Jalop1991 absolutely. I'm probably coming into a 31 Model A, and there's a great retrofit system for that. It makes a bunch of sense.
  • TMA1 Been thinking about getting one of these for my mother. Skip the AWD and DSG, the FWD comes with an 8-spd. Good size vehicle for a woman who wants a SUV and has a small garage. Much better view outwards than the Mazda CX-30 I was looking at. Wish it had a power tailgate though - she's short.