JPMorgan Lowers Nikola Price Target, Sees 'Execution Risk Associated With A Tarnished Brand'

Although there are reasons to be constructive heading into 2021, JPMorgan is lowering its estimates for Nikola Corporation’s NKLA gross margins to reflect the “lack of scale in the first 18 months of truck sales,” the sell-side firm said Monday. 

The Nikola Analyst: Paul Coster maintained an Overweight rating on Nikola and reduced the price target from $40 to $35.

The Nikola Thesis: The price target has been reduced to reflect “the execution risk associated with a tarnished brand,” Coster said in the note.

Nikola was prudent to exit the partnerships with General Motors Company GM and Republic Services, Inc. RSG, as these arrangements committed the company’s resources to non-strategic initiatives, the analyst said.

Despite this, the stock plummeted around 50% the last month on news of the partnerships being terminated, he said. 

“We believe two NKLA Tres are now in Arizona, one has been commissioned and is meeting expectations…NKLA expects to have at least nine trucks for testing by end of the 1Q21, consistent with commercial availability of the Tre in late 2021,” Coster said. 

NKLA Price Action: Shares of Nikola were up 11.85% at $15.38 at last check. 

Photo courtesy of Nikola.