Nikola stock has experienced a rollercoaster ride over the past month, with investors trying to digest a flurry of news, most of which has been positive. This ride is far from over, as the stock is once again on the move in early Monday trading.
Over the past month, Nikola shares (ticker: NKLA) have seen daily fluctuations of an average of 10.4%. In fact, there have been seven instances where the shares moved more than 10% in either direction. It seems Monday could bring yet another significant shift of possibly over 10%.
In early premarket trading, Nikola stock showed promising signs by opening with a 10.4% increase, but it later settled to a 7.6% gain. Looking at the broader market, S&P 500 and Nasdaq Composite futures are up by 0.3% and 0.4%, respectively.
While there isn't much news directly driving Monday's gains, analysts speculate that part of it is a rebound from Friday's losses. On that day, Nikola stock declined by 26.4%, closing at $2.50 per share. This downward trend followed the release of an earnings report that wasn't entirely negative.
D.A. Davidson analyst Michael Shlisky suggested that the second-quarter report delivered both good and bad news. On the positive side, the required cash to develop the business is decreasing, and demand for Nikola's hydrogen fuel cell-powered heavy-duty truck remains strong. However, the company did reduce its full-year sales guidance, and there was a notable change in leadership as well.
Former CEO Michael Lohscheller stepped down due to a family health issue, which can be seen as a negative development. However, the incoming CEO, Steve Girsky, brings extensive experience in the automotive industry and serves as the chairman of Nikola's board.
In summary, Nikola stock continues to provide an exhilarating ride for investors. Despite some setbacks, such as the management change and revised sales guidance, positive factors such as reduced cash needs and strong demand for their innovative product offer a glimmer of hope for the company's future.
Nikola Stock Facing Volatility After Approval of Share Increase
Shilsky, a prominent analyst, rates Nikola shares as "Hold" with a price target of $2.50 per share. However, after the recent earnings report, he reduced the price target by 50 cents per share. Interestingly, only 13% of the analysts covering Nikola stock give it a "Buy" rating, in contrast to the average Buy-rating ratio of about 55% for S&P 500 stocks. As per FactSet, the average analyst price target for Nikola shares is $2.70.
Surprisingly, the stock experienced a decline on Friday despite positive news. Shareholders finally approved a proposal to increase the maximum number of shares that the company can issue. This development paves the way for future capital raises.
Nikola management anticipates requiring an additional $600 million in capital to achieve cash-breakeven. The approval to increase the number of shares indicates that a stock sale is likely to happen sooner rather than later. Consequently, some shareholders may opt to sell their shares to avoid potential volatility.
It's important to acknowledge that this selling pressure contributes to stock volatility itself.
In certain cases, volatility persists even after significant news, akin to aftershocks following an initial earthquake. In the case of Nikola, the initial earthquake took place on July 13 when the stock surged by 61% following a substantial order for 50 fuel cell trucks from BayoTech. Prior to this announcement, Nikola stock was valued at $1.38 per share. On Thursday, just before the release of earnings, it closed at $3.40.