Nikola stock has been experiencing a whirlwind of activity over the past month, with investors taking in a plethora of news, much of it positive. And the ride is far from over, as the stock is once again on the move in early Monday trading.
Over the last month, Nikola (ticker: NKLA) shares have seen daily fluctuations of an average of 10.4%. In fact, there have been seven instances where the stock has moved up or down by more than 10% during this period. It wouldn't be surprising to witness yet another 10% surge today.
In early premarket trading, Nikola stock saw a 10.4% increase, which later settled to a 7.6% gain. Meanwhile, S&P 500 and Nasdaq Composite futures are up 0.3% and 0.4% respectively.
Despite the gains observed today, there isn't a significant news catalyst that can be attributed to Monday's positive movement. However, it is possible that this is a rebound from Friday's losses when Nikola stock experienced a sharp decline of 26.4%. The stock closed at $2.50 per share following an earnings report that, despite not being entirely negative, led to the drop.
According to D.A. Davidson analyst Michael Shlisky, the second-quarter report presented a mixture of good and bad news. On the positive side, the cash required to support the business is decreasing, indicating progress. Furthermore, there is still strong demand for Nikola's hydrogen fuel cell-powered heavy-duty truck, adding to the positive sentiment surrounding the company. However, the full-year sales guidance was reduced and a new CEO was appointed.
While these developments have some negative implications, it's worth noting that the former CEO, Michael Lohscheller, stepped down due to a family health issue, which can be considered a personal matter. The new CEO, Steve Girsky, brings a wealth of automotive executive experience and currently serves as the chairman of Nikola's board.
Nikola Stock Update
In the latest analysis of Nikola Corporation's stock, Shilsky rates the shares as Hold and has set a price target of $2.50 per share. This price target has been revised down by 50 cents following the recent earnings report.
Out of the analysts covering Nikola stock, only one out of eight (or 13%) rate the shares as Buy. This stands in contrast to the average Buy-rating ratio for stocks in the S&P 500, which is approximately 55%. Furthermore, the average analyst price target for Nikola stock is estimated to be $2.70 per share.
Implications of Shareholder Approval
Interestingly, despite some positive news, Nikola shares experienced a decline on Friday. This decline may be counterintuitive and can be attributed to shareholders approving a proposal to increase the maximum number of shares allowed by the company. This approval paves the way for future capital raises.
Need for Additional Capital
Nikola management anticipates that they will require an additional $600 million in capital to achieve cash-breakeven status. Although this requirement is not surprising, the approval to increase the number of shares suggests that a stock sale may be imminent. The potential for a stock sale can lead to selling among shareholders who wish to avoid volatility.
Impact of Volatility
The possibility of a stock sale can introduce volatility into the market, as some shareholders prefer to sell their shares rather than endure unpredictable fluctuations. It is worth noting that this selling activity can further contribute to stock volatility.
Aftermath of Major News
It is not uncommon for volatility to linger after major news events, akin to aftershocks following an earthquake. In the case of Nikola, the significant news came on July 13 when the company received an order for 50 fuel cell trucks from BayoTech. Prior to this announcement, Nikola stock was valued at $1.38 per share. However, following the news, the stock price surged by 61% and closed at $3.40 per share on Thursday, just before the release of the earnings report.
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