It hasn’t been an easy month for Nikola (NASDAQ:NKLA), but things could be about to get worse. The electric vehicle (EV) producer has been falling all year, gradually trending downward amid an onslaught of bad news. But today brought a highly discouraging update as Evercore ISI slashed its NKLA stock price target.
While the firm reiterated an “in line” rating for the troubled automaker, it lowered its price target from $2 to $1, making it clear where it stands on the stock. Shares have been falling all day, indicating that Evercore’s bearish take may be an astute prediction. But Nikola’s troubles started many months ago and are by no means confined to Wall Street ratings.
What’s Happening With NKLA Stock?
While it currently hovers above the $1 mark set by Evercore, NKLA stock isn’t doing anything to reassure investors that it can rally. As of this writing, it is down 2.5% for the day and its current trajectory suggests that it has further to fall. Today’s pattern of volatility is well in line with how it has performed all week, helping it shed almost 30% of its value throughout the previous month.
Evercore cited too many economic headwinds as a driving force behind its price target reduction. However, it also notes the troubling pattern of leadership turnover which has also helped push NKLA stock down recently. Per CNBC:
“Nikola recently announced the retirement of CFO Kim Brady with former VP & Corporate Controller Anastasiya Pasterick taking the vacant seat as successor. Outside of this shift in management, the company continues to battle funding headwinds.”
Reducing its price target by 50% may seem harsh. For a more stable company, it would be. But Nikola is the furthest thing from stable. It is a penny stock that currently sits dangerously close to microcap level.
The stock is down more than 85% for the year and there is nothing to suggest that a turnaround is coming. Strikes against the company are numerous. In October 2022, a federal jury in New York found founder Trevor Milton guilty of multiple counts of securities fraud.
While NKLA stock saw some slight growth in January 2023 on news of a large-scale order, it quickly fell back down. On March 31, shares plunged when the company reported plans to sell $100 million in shares.
The only positive thing that Nikola has going for it is its favorite status among short sellers. This may make it a tempting play for speculative traders seeking the next short squeeze. However, even the possibility of a massive squeeze hasn’t helped shares in recent weeks as bad news has piled up.
The Road Ahead
Last week, InvestorPlace contributor Larry Ramer raised an important question regarding NKLA stock: “Is Lucid the Next Nikola … or Worse?”
While it’s certainly true that Lucid Motors (NASDAQ:LCID) has been struggling lately, Nikola could be more aptly compared to Mullen Automotive (NASDAQ:MULN), a fellow troubled meme stock with no real growth prospects.
Granted, Mullen makes Nikola look like a stable investment, struggling to stay above 10 cents per share and battling constant delisting concerns. Even on its best days, Mullen is barely able to rise, and like Nikola, has seen more than its fair share of turnover at the management level.
Despite its recent declines, LCID still trades well above penny stock levels. The same can’t be said for NKLA stock or MULN. If Evercore’s price target proves correct, Nikola could easily descend to Mullen levels.
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On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.