By on June 22, 2020

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]

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15 Comments on “JPMorgan Slams Brakes on Nikola’s Stock...”


  • avatar
    Pig_Iron

    Truckers don’t like cab-overs. Perhaps more conventional style, like a low nose.
    And that valuation is big considering: Tesla competitor Nikola Motor Company threatens to sue Bloomberg over story calling its debut electric semitruck ‘inoperable, missing parts’ -BI

    Hey but like Lie2Me says: “When there’s nothing to sell, sell nothing”

    • 0 avatar
      redapple

      PIG
      RE CAB OVERS.

      Are dis liked for a simple reason. Sitting above the axle gives you a bad ride. 1/2 way between the axles – like a conventional tractor- gives you a good ride. 3 inch movement – yields only 1.5 inch of movement in the middle of truck (if the suspension was non existent). It s math.

      • 0 avatar
        Pig_Iron

        That, and the doghouse. I’m not sure how flat this cab’s floor would be.
        Oh yeah, and having unsecured belongings plunge through windshield from the sleeper bunk when the cab is tilted to service the powertrain.

      • 0 avatar
        conundrum

        And that three inch bump is what suspension is there for in the first place. Buses have the driver over or in front of the front axle and the ride is fine. It depends on the engineering. Does a minivan ride worse than a pickup truck? I bet those European tractor semis ride just fine. They aren’t made to Mack standards of blacksmith engineering from the 1950s.

        There, and I is an injuneer.

    • 0 avatar
      indi500fan

      I understand the physics, but aren’t almost all Euro semis in the CO form like the one shown?

      • 0 avatar
        Hydromatic

        Due to strict length limitations, yes. Truckers on East Coast routes had to deal with that, too, hence the cabovers that proliferated in the U.S. up until the 1980s or thereabout.

  • avatar
    SCE to AUX

    Even JP Morgan is crazy to make revenue projections for 2027, for anybody, let alone a vaporware company.

  • avatar
    mcs

    “rapid deployment of hydrogen infrastructure”

    Yeah, “rapid deployment” and “hydrogen infrastructure” don’t belong in the same sentence. Oh, I can’t wait for large trucks to be rolling down the highway with those 10,000 psi tanks on board. Should be interesting the first time one gets hit with a train. Those tanks need to be replaced periodically. Of course, the trucking industry is known for its meticulous and thorough maintenance so we should have nothing to worry about./sarc

  • avatar
    ToolGuy

    Am potentially interested in purchasing “junk” (non-investment-grade) bonds from a company with visionary leadership and a strong presence in the conventional light-duty pickup market. Any recommendations?

  • avatar
    myllis

    European trucks are mostly cab -models. And they are comfortable, good ernomics, good to ride. You should once take a longer survey with european model Volvo, Scania or Sisu. Maybe the question is in UStrucks lousy suspension. US trucks are still like middle age if you compare Europeans trucks. they are big sized, but underpowered and max. payload is very small. Finland and Sweden has allowed couple years ago maxi-trucks, It’s usually Sisu (if question is timber truck) and normal road trucks are Scania or Volvo. Truck length is 35yards and max. weight 115 ton (US).

    • 0 avatar
      DenverMike

      European truckers would demand conventional trucks if it weren’t for length restrictions (the US, North America have none).

      40 tons is plenty, for normal loads, populated areas, hazmat, etc.

      Air suspension and air seats are universal, but no one would prefer to ride over/ahead of the front axle if given a choice.

  • avatar
    schmitt trigger

    Having an agency rate your company as “neutral”, is akin to saying that dog sh!t has a distinctly pungent, not entirely satisfying yet fruity bouquet.

  • avatar
    myllis

    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.

  • avatar
    myllis

    Sisu videos
    https://youtu.be/8pYKKZNJIfA

    timber Sisu, why Cab is so superior
    https://youtu.be/pNcKDY71mxw

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