Should You Investigate Nikola Corporation (NASDAQ:NKLA) At US$8.00?

By
Simply Wall St
Published
April 20, 2022
NasdaqGS:NKLA
Source: Shutterstock

While Nikola Corporation (NASDAQ:NKLA) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Nikola’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Nikola

What's the opportunity in Nikola?

According to my valuation model, Nikola seems to be fairly priced at around 12.51% above my intrinsic value, which means if you buy Nikola today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $7.11, there’s only an insignificant downside when the price falls to its real value. In addition to this, Nikola has a low beta, which suggests its share price is less volatile than the wider market.

What kind of growth will Nikola generate?

earnings-and-revenue-growth
NasdaqGS:NKLA Earnings and Revenue Growth April 20th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for Nikola. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in NKLA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on NKLA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 5 warning signs for Nikola you should be mindful of and 2 of them make us uncomfortable.

If you are no longer interested in Nikola, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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