On Wednesday, TD Cowen adjusted its outlook on Nikola Corp . (NASDAQ:NKLA), reducing the electric vehicle manufacturer's stock price target to $0.50, a significant decrease from the previous $1.00 target. The firm has chosen to maintain a Hold rating on the stock.
The decision comes after Nikola reported a disappointing first quarter for 2024, with earnings before interest, taxes, depreciation, and amortization (EBITDA) falling short of expectations. The cost of goods sold (COGS) was higher than anticipated, and the free cash flow (FCF) burn rate exceeded projections.
These financial challenges have led to the removal of the 2024 profit and loss (P&L) guidance, although the forecast for 2024 fuel-cell electric vehicle (FCEV) deliveries remains unchanged.
The new Chief Financial Officer, Thomas Okra, has expressed the need for additional time to increase production volumes and strengthen relationships with suppliers. In response to these developments, Nikola is planning to expand its market reach beyond California and Canada, targeting national accounts. The company is also prepared to be flexible with its average selling price (ASP) in order to secure initial deals.
The revised stock price target of $0.50 is based on twice the projected 2025 enterprise value-to-sales (EV/sales) ratio. This adjustment reflects the firm's updated expectations for Nikola's financial performance and market strategy in the coming years.
InvestingPro Insights
Recent data from InvestingPro shows Nikola Corp. (NASDAQ:NKLA) holding a market capitalization of approximately $795.94 million. Despite the challenges faced in the first quarter of 2024, Nikola possesses more cash than debt on its balance sheet, which could provide some financial flexibility in its operations.
Still, the company has been quickly burning through cash, and analysts have revised their earnings downwards for the upcoming period, reflecting concerns over Nikola's financial health and its ability to maintain operations without additional funding.
With a current price significantly below the 52-week high, the stock exhibits high price volatility, which may attract certain investors while deterring others seeking stability. The company's revenue growth has decreased by 45.62% in the last twelve months as of Q1 2024, and its gross profit margin stands at a concerning -762.26%, indicating severe cost management and pricing strategy challenges.
InvestingPro Tips suggest that while analysts anticipate sales growth in the current year, they do not expect the company to be profitable this year. For investors seeking more comprehensive insights, there are 15 additional InvestingPro Tips available, which can provide a deeper analysis of Nikola's financial position and market potential. To access these tips and enhance your investment strategy, use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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