December 15th, 2015

JPMorgan stands by Nikola 'buy' rating following chairman Trevor Milton's departure

Nikola Trevor MiltonREUTERS/Massimo Pinca

Summary List Placement
  • JPMorgan is standing by its "buy" rating for Nikola, even as the executive chairman and founder Trevor Milton resigned.
  • Analysts from the firm wrote that the stock of the electric-truck company may not be fully pricing in a "successful execution of the multi-year growth strategy," which would yield $1.6 billion Ebitda in 2027. 
  • JPMorgan is also cutting its 2021 year-end price target to $41 per share from $45 per share. 
  • "Milton's resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now," the JPMorgan team wrote.

JPMorgan reiterated its "buy" rating for Nikola despite news on Monday that executive chairman and founder Trevor Milton resigned. 

"We believe the stock may not fully price in successful execution of the multi-year growth strategy, which yields earning power of ~$1.6bn EBITDA in 2027E," a team of analysts led by Paul Coster wrote in a Monday note.

The firm is also cutting its 2021 year-end price target for the electric-truck company to $41 per share from $45, to "reflect the risk associated with the resignation."

"We believe the inbound Chairman, a former GM board member, is probably better suited to the next – execution – phase of the company's development," the team wrote. "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."

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Nikola tumbled as much as 30% after the Monday opening bell. 

The analysts wrote that Nikola is currently a "story stock," but they are "on board" so long as the company executes to plan, and providing that the stock offers a favorable risk-reward trade-off. 

The JPMorgan analysts also said that they may become less constructive on Nikola if Milton sells his own stock in the company. The Nikola founder owns roughly one-quarter of the company's approximately 380 million shares outstanding, according to a mid-September Securities and Exchange Commission filing.

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