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Time To Worry? Analysts Just Downgraded Their Nikola Corporation (NASDAQ:NKLA) Outlook

Simply Wall St
·3 min read

Today is shaping up negative for Nikola Corporation ( NASDAQ:NKLA ) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Investors however, have been notably more optimistic about Nikola recently, with the stock price up a remarkable 24% to US$24.11 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the latest downgrade, the six analysts covering Nikola provided consensus estimates of US$111k revenue in 2020, which would reflect a sizeable 75% decline over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 60% to US$1.05. However, before this estimates update, the consensus had been expecting revenues of US$139k and US$1.05 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also making no real change to the loss per share numbers.

Check out our latest analysis for Nikola

earnings-and-revenue-growth
earnings-and-revenue-growth

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. These estimates imply that revenue is expected to slow, with a forecast revenue decline of 75%, a significant reduction from annual growth of 35% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.4% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Nikola is expected to lag the wider industry.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow its revenue slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Nikola going forwards.

There might be good reason for analyst bearishness towards Nikola, like a short cash runway. For more information, you can click here to discover this and the 2 other risks we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying .

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com .