Nikola Stock Is 35% Too Expensive – But Millennials Keep Piling in Anyway

JPMorgan thinks Nikola stock is crazy overvalued. But the upstart automaker continues to dazzle the millennial "investors" on Robinhood.
Posted in: MarketsOp-ed
Published:
June 23, 2020 3:59 PM UTC
  • Nikola’s stock is roughly double the price at which it debuted earlier this month.
  • The stock is “fully valued” – and then some – according to JPMorgan.
  • Millennials love the stock to bits and aren’t fazed about predictions auguring a big decline.

Nikola Corporation (NASDAQ: NKLA) has enjoyed an incredible month. The upstart automaker’s stock price has doubled since it began trading on June 4.

But JPMorgan is already warning investors to slam the brakes. The Wall Street firm has set a stock price target of $45 based on earnings seven years away. With Nikola having closed Monday at $70, this means the stock is overvalued by about 35%.

Nikola stock is well off its highs, but JPMorgan says it’s still overvalued. | Source: Yahoo Finance

The Wall Street firm wrote:

risks are elevated for this pre-revenue company, and the stock looks fully valued here, so we look for a pull-back or incremental positive developments to get more constructive.

But this forecast has hardly prevented the company from continuing to be a millennial favorite.

Robinhood traders board Nikola’s (still) nonexistent trucks in droves

Though Nikola debuted on the stock market in a reverse merger earlier this month, it is already the second-most popular stock on Robinhood in the past 30 days.

According to Robintrack data, over 148,000 “investors” currently hold the stock on the millennial-friendly brokerage. This is far above the number of new investors other millennial favorites such as Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Tesla (NASDAQ: TSLA) have attracted in the last 30 days.

Nikola is the second-most popular stock on Robinhood over the past 30 days. | Source: Robintrack

Even more remarkable is that at this level, the stock is below peak investor interest. Less than a week ago, the number of users holding the stock was nearly 153,000. This could suggest profit-taking among some speculators.

Nikola engages revenue-generating gear

Nikola has been ridiculed as a no-revenue company. But in the next few months, the renewable energy carmaker will be working overtime to mature past that image.

On June 29, Nikola will launch pre-orders for its Badger light truck. The company’s founder and executive chairman, Trevor Milton, claims that the truck will compete directly with the Ford F-150 and the Tesla Cybertruck.

And next month, Nikola’s manufacturing facility in Coolidge, Arizona, will break ground. The factory – whose initial construction phase should be completed in 2021- will serve as an assembly plant for battery-powered electric vehicles.

Only two analysts are even covering the stock

JPMorgan is not alone in offering a bearish take on Nikola.

Just days after Nikola started trading, online investment newsletter Citron Research set a price target of $40. Citron founder Andrew Left predicted the price target would be hit “in a month.”

Citron Research expects Nikola to fall to $40 on the back of a lack of “real IP (intellectual property).” | Source: Twitter

Currently, only two analysts are formally covering Nikola: Cowen and JPMorgan. While JPMorgan has issued a neutral rating, Cowen actually recommends buying Nikola.

Cowen set a price target of $79 on the stock last week. That suggests NKLA has about 15% worth of upside.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.

Josiah Wilmoth edited this article for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor or find a factual, spelling, or grammar error, please contact us.

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Mark Emem @wetalkmarkets

I cover business and the stock market for CCN. Currently based out of Nairobi, Kenya. Feel free to get in touch with me. Email: wetalkmarkets[at]yahoo.com

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