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May 11, 2023
By Simply
Wall Street
Earnings Release:
Here's Why Analysts Cut Their Nikola Corporation
(NASDAQ:NKLA) Price Target To US$2.33A
It's shaping up to be a tough period for Nikola
Corporation (NASDAQ:NKLA), which a week ago released some
disappointing quarterly results that could have a notable impact on
how the market views the stock. The numbers were fairly weak, with
sales of US$11m missing analyst predictions by 10.0%, and (statutory)
losses of US$0.31 per share being slightly larger than what the
analysts had expected. Earnings are an important time for investors,
as they can track a company's performance, look at what the analysts
are forecasting for next year, and see if there's been a change in
sentiment towards the company. We've gathered the most recent
statutory forecasts to see whether the analysts have changed their
earnings models, following these results.
Taking into account the latest results, the
consensus forecast from Nikola's seven analysts is for revenues of
US$154.5m in 2023, which would reflect a sizeable 157% improvement in
sales compared to the last 12 months. Losses are supposed to decline,
shrinking 16% from last year to US$0.97. Before this earnings
announcement, the analysts had been modelling revenues of US$151.7m
and losses of US$1.08 per share in 2023. Although the revenue
estimates have not really changed Nikola'sfuture looks a little
different to the past, with a cut to the loss per share forecasts in
particular.
Even with the lower forecast losses, the analysts lowered their
valuations, with the average price target falling 26% to US$2.33. It
looks likethe analysts have become less optimistic about the overall
business. The consensus price target is just an average of individual
analyst targets, so - it could be handy to see how wide the range of
underlying estimates is. The most optimistic Nikola analyst has a
price target of US$4.00 per share, while the most pessimistic values
it at US$1.00. So we wouldn't be assigning too much credibility to
analyst price targets in this case, because there are clearly some
widely different views on what kind of performance this business can
generate. As a result it might not be a great idea to make decisions
based on the consensus price target, which is after all just an
average of this wide range of estimates.
One way to get more context on these forecasts is to look at how they
compare to both past performance, and how other companies in the same
industry are performing. The analysts are definitely expecting
Nikola's growth to accelerate, with the forecast 253% annualised
growth to the end of 2023 ranking favourably alongside historical
growth of 136% per annum over the past three years. By contrast, our
data suggests that other companies (with analyst coverage) in a
similar industry are forecast to grow their revenue at 4.8% per year.
Factoring in the forecast acceleration in revenue, it's pretty clear
that Nikola is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to
their forecasts for a loss next year. Happily, there were no major
changes to revenue forecasts, with the business still expected to grow
faster than the wider industry. Furthermore, the analysts also cut
their price targets, suggesting that the latest news has led to
greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term
prospects of the business are much more relevant than next year's
earnings. At Simply Wall St, we have a full range of analyst estimates
for Nikola going out to 2025, and you can see them free on our
platform here..
Don't forget that there may still be risks. For instance, we've
identified 5 warning signs for Nikola (2 shouldn't be ignored) you
should be aware of.
Have feedback on this article? Concerned about the
content? Get
in touch with
us directly. Alternatively,
email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We
provide commentary based on historical data and analyst forecasts only
using an unbiased methodology and our articles are not intended to be
financial advice. It does not constitute a recommendation to
buy or sell any stock, and does not take account of your objectives,
or your financial situation. We aim to bring you long-term focused
analysis driven by fundamental data. Note that our analysis may not
factor in the latest price-sensitive company announcements or
qualitative material. Simply Wall St has no position in any stocks
mentioned.
Green Play Ammonia™, Yielder® NFuel Energy.
Spokane, Washington. 99212
www.exactrix.com
509 995 1879 cell, Pacific.
Nathan1@greenplayammonia.com
exactrix@exactrix.com
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