Nikola
- CFRA reiterated its "sell" rating and lowered its price target to $8 on shares of Nikola Thursday.
- Analyst Garrett Nelson cited operational headwinds and insider sales from founder Trevor Milton as his reasoning.
- Nelson says he has a "low degree of confidence in management's ability to execute" amid competition.
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Nikola could sink 27% from current levels due to "daunting operational headwinds" and consistent insider sales, according to CFRA Research.
In a note to clients on Thursday, Garret Nelson, a senior equity analyst at CFRA Research, reiterated his "sell" rating on Nikola and lowered his price target to $8 per share from $12.
The price target represents a potential 27% fall in share prices from Friday's intraday high.
The analyst cited consistent insider sales from Nikola's founder Trevor Milton, daunting operational headwinds, and competition from Tesla as his reasoning for the more bearish outlook.
According to CFRA, Trevor Milton sold 3.5 million shares of Nikola for approximately $49 million a couple of weeks ago and has reduced his ownership to just over 20% of outstanding shares.
Milton is the target of an ongoing investigation by the SEC's Division of Enforcement and the US Attorney's Office for the Southern District of New York.
The founder was the subject of a short seller takedown published by Hindenburg Research in September of 2020 that accused him of exaggerating and misrepresenting the development of his company's products.
"We have gathered extensive evidence - including recorded phone calls, text messages, private emails, and behind-the-scenes photographs - detailing dozens of false statements by $NKLA Founder Trevor Milton," Hindenburg Research said.
"We have never seen this level of deception at a public company," the firm added.
Insider also recently spoke with 38 people who have worked or interacted with Milton and some said the CEO has a long history of bending the truth.
Even absent legal issues, however, CFRA's Nelson sees Nikola struggling to take market share from Tesla with the planned launch of the company's semi-truck coming later this year.
Nelson also said Nikola faces parts shortages and that he has "a low degree of confidence in management's ability to execute."
Nikola has yet to produce any significant revenues and posted a net loss of $384.3 million in 2020 alone, according to the firm's SEC filings.
Despite legal issues and serious competition, Nikola does have some analyst support. Dan Ives of Wedbush upgraded Nikola to a "hold" rating and gave the firm a $25 price target in late February.
The analyst said Nikola is set to benefit from a "green tidal wave" of government spending from the Biden administration and noted the progress on the company's Arizona factory buildout.
A Youtuber who goes by the name Bear's Workshop has been tracking the significant progress of the buildout in Coolidge, Arizona.