Nikola tumbles as first Wall Street 'sell' rating projects another 29% plunge over next 12 months
- Nikola tanked as much as 24% in Thursday trading after Wedbush analysts led by Dan Ives gave the automaker its first "sell" rating.
- The team also lowered its price target for Nikola shares to $15 from $45, implying a 29% drop over the next 12 months from Wednesday's close.
- Wedbush cited founder Trevor Milton's abrupt exit from the company on Monday and execution risks for the downgrade.
- Nikola stock has traded with sharp volatility through September since the short-selling firm Hindenburg Research accused the company of misleading investors and lying about its vehicles' capabilities.
- Watch Nikola trade live here.
Nikola shares tanked as much as 24% on Thursday after Wedbush slapped the firm with its first "sell" rating and forecasted a massive drop from Wednesday's close.
After a "Twilight Zone-like few weeks" for the electric-vehicle stock, Wedbush said it sees risks skewing to the downside for Nikola shareholders. Analysts led by Dan Ives lowered their rating on the shares to "underperform" from "neutral," signaling an about-face on Wall Street as firms reset their expectations for the Tesla competitor.
Ives also lowered the firm's price target for Nikola to $15 from $45, implying a drop of 29% over the next 12 months from Wednesday's close.
Nikola shares retraced some losses through the morning.
Wedbush highlighted two reasons for its downgrade. Founder Trevor Milton's abrupt departure from the company on Monday removes a "visionary, architect, and internal/external force" from Nikola and "leaves a huge void that is hard to replace," Ives wrote.
The exit came after the short-selling firm Hindenburg Research published a note earlier this month accusing Nikola of fraud. Milton and the automaker rebutted the claims, but shares continued to sink as the controversy led to a Securities and Exchange Commission investigation and scared off investors. With Nikola still in its early growth stage, the allegations and related responses stand to weigh on Nikola shares for some time, Wedbush said.
"The recent questions surrounding the Nikola story raised by the bears will be a dark cloud over the stock until answered, especially with no fundamental or delivery catalysts in the near-term," the analysts added.
Wedbush also pointed to Tesla's Battery Day as a disruption to Nikola's path forward. Elon Musk's company revealed "eye popping battery innovations" at the Tuesday event, and the new technology "throws a wrench" in the investment potential of Nikola's hydrogen-fuel-cell vehicles, Ives wrote.
Nikola's partnership with General Motors and promising order book still present opportunity, Wedbush said. But the automaker's lack of revenue, hefty cash burn, and competition in the electric-trucking sector drove the firm's "very cautious view" of the volatile shares.
Nikola closed at $21.15 per share on Wednesday.
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