The analysts might have been a bit too bullish on Nikola Corporation (NASDAQ:NKLA), given that the company fell short of expectations when it released its first-quarter results last week. Nikola missed analyst estimates, with revenues of US$11m and a statutory loss per share (eps) of US$0.31 falling 10.0% and 2.2% below expectations, respectively. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Nikola from seven analysts is for revenues of US$154.5m in 2023 which, if met, would be a substantial 157% increase on its sales over the past 12 months. Losses are expected to be contained, narrowing 16% from last year to US$0.97. Before this latest report, the consensus had been expecting revenues of US$151.7m and US$1.08 per share in losses. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a notable improvement in losses per share in particular.
Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 26% to US$2.33. It looks likethe analysts have become less optimistic about the overall business. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Nikola analyst has a price target of US$4.00 per share, while the most pessimistic values it at US$1.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Nikola's rate of growth is expected to accelerate meaningfully, with the forecast 253% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 136% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 4.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Nikola to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Nikola. Long-term earnings power is much more important than next year's profits. We have forecasts for Nikola going out to 2025, and you can see them free on our platform here.
You still need to take note of risks, for example - Nikola has 5 warning signs (and 2 which are significant) we think you should know about.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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