By Claudia Assis, MarketWatch
Shares of Nikola Corp. added to earlier losses on Monday as Wall Street faulted founder Trevor Milton for his “missteps” in the wake of his resignation but largely kept its expectations for the stock unchanged.
Nikola /zigman2/quotes/208704275/composite NKLA -9.05% stock fell more than 20%, on track for its lowest close since May 22 and its largest percentage decline since July 20.
Monday’s losses would snap a three-session winning streak for the shares, which are down 34% this month but 161% higher in the year. That compares with gains of around 0.5% for the S&P 500 /zigman2/quotes/210599714/realtime SPX -3.27% this year.
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Nikola’s board announced Milton’s voluntary departure earlier Monday, naming board member and former General Motors Co. /zigman2/quotes/205226835/composite GM -1.86% executive Stephen Girsky as board chairman. The focus “should be on the company and its world-changing mission, not me,” Milton said in the statement accompanying the news.
Milton’s departure comes roughly two weeks after a scathing report earlier this month by short seller Hindenburg Research that roiled the company’s shares, accusing Nikola of being an “intricate fraud” built on lies told by Milton. The electric-vehicle maker fired back by saying the report was “false and misleading.”
The Justice Department and the Securities and Exchange Commission are reportedly in looking into the allegations.
Of the five analysts covering Nikola polled by FactSet, three rate the stock a hold and two rate it a buy. Their average price target is $47.50, implying an upside of more than 75% over Monday’s prices.
JPMorgan analyst Paul Coster kept his overweight rating on Nikola shares, but dialed down his price target to $41 from $45 “to reflect risk,” he said in a note Monday.
The new chairman may be a better fit for Nikola in its next phase, “but Trevor Milton’s resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now, just as the workload is intensifying and competitive threat looms,” he said.
JPMorgan kept its expectations for the stock unchanged, saying it presumes that Nikola “will still execute to plan given that most developments to date have slightly exceeded our expectations, that is with the exception of Mr. Milton’s social media and marketing missteps.”
Milton’s departure was a positive for the stock, even as the “optics of the resignation are terrible,” Jeffrey Osborne at Cowen said in their note.
Cowen kept its rating on Nikola stock at their equivalent of buy with a $79 price target.
“Hopefully this will minimize the drama in the weeks and months ahead as the company moves forward with the development of its all electric and fuel cell Class 8 trucks and related infrastructure as well as works to close the deal with General Motors,” he said.
Milton relied heavily on his Twitter and Instagram accounts to engage with critics of his company, showing that “there were some elements of being a public company that in our view the company and some members of management were not prepared for,” the analyst said.
New board chair Girsky and other senior executives at the helm “will set a more measured and less promotional tone with investors. We continue to see catalysts ahead for the stock,” Osborne said.
Dan Ives of Wedbush called Milton’s departure a “shocking move.”
“Trevor stepping down voluntarily at Nikola will be perceived by the Street as a major near-term gut punch for the company’s lofty EV ambitions as he plays a key role strategically in driving the company’s vision,” Ives said.
“While there will be a lot of worries on the Street around Trevor’s departure especially in light of the bear noise recently with the company, going forward Nikola has a strong bench and now it’s all about execution going forward with the GM partnership a linchpin to its success.”
Nikola is still a “prove me” stock, Ives said, keeping his rating the equivalent of hold with a price target of $45.