Nikola Slumps After Capital Raising Filing

Shares in electric truck maker Nikola Corporation (NKLA) tumbled 3.75% in extended-hours trade Monday after the company announced through an SEC filing that it plans to undertake a $100 million stock offering. According to the filing, Nikola intends to use the funds raised for general corporate purposes. The company said this may include completing its Arizona manufacturing facility and developing its commercial electric and fuel-cell commercial and hydrogen-station infrastructure.

Despite the company reporting a fourth-quarter loss that came in narrower than many analysts had expected (17 cent EPS loss vs. 24 cent loss), management disappointed investors by not providing further progress about how it’s traveling on turning EV truck designs into sales. The quarter was also marred by fellow automaker General Motors Company (GM) unwinding an equity stake in the company and exiting a partnership to build Nikola’s flagship Badger pickup truck.

Through Monday’s close, Nikola stock has a market value of $6.69 billion and trades over 50% higher over the past year. However, since the company’s latest earnings report on Feb. 25, the shares have shed 13.5%.

Wall Street View

Earlier this month, JPMorgan analyst Paul Coster downgraded Nikola to ‘Neutral’ from ‘Overweight,’ and trimmed his price target to $30, down from $33. The analyst said he thinks much of the good news is already built into the stock but noted that it may rally again later this year as the first fuel cell electric vehicle prototype becomes a reality.

Other analysts covering the stock want to see more from the company before committing to upgrades. Currently, it receives one ‘Buy’ rating and six ‘Hold’ ratings. Twelve-month price targets range from a Street-high $47 to $17 low. Meanwhile, Monday’s $17.06 close sits 49% below the median target price of $25.50.

Technical Outlook and Trading Tactics

Over the past six months, Nikola shares have found support at the crucial $14 support level after steep declines. The recent bounce from this closely watched area also coincides with a cross of the moving average convergence divergence (MACD) indicator to generate a buy signal.

Active traders who enter here should book profits on a move up to key overhead resistance at $29. Consider placing a stop-loss order beneath this month’s swing low at $14.05.

For a look at today’s earnings schedule, check out our earnings calendar.