Nikola Corporation (NASDAQ:NKLA): Ready to Explode According to Analysts?

In this article, we'll discuss analysts' upside potential for Nikola Corporation (NASDAQ:NKLA). We have prepared a free list that you can visit at 8 Best Small Cap Stocks Ready to Explode According to Analysts.

Though Nikola Corporation (NASDAQ:NKLA) ranks 2nd in our list of the 8 Best Small-Cap Stocks Ready to Explode According to Analysts, we have analyzed the stock in detail.

Small-cap stocks are companies that have a market capitalization falling between $300 million and $2 billion.

We’ve often seen these smaller enterprises outshined by their large-cap counterparts, also because stocks like Google, Apple, Amazon etc. are known for their power to move entire markets. But it doesn’t mean that these small-cap stocks cannot present some golden opportunities for investment.

Small-cap stocks started gaining momentum during the last quarter of 2023, driven primarily by the AI-led rally that pushed the entire stock market high, thus putting away any immediate worries of an upcoming recession. According to Julius Baer, a private banking company based in Zurich, small-cap stocks have proven to, in fact, even outperform their larger-cap counterparts over very long periods. The report mentions that a dollar invested in US large-caps in 1926 grew in value to $5,767 by the end of 2018. Meanwhile, a single dollar invested in small-caps instead would have been worth a whopping $38,842 – almost seven times more.

However, what really makes these stocks attractive to investors is their potential for high returns. We will much more often see companies doubling their market capitalization from $1 billion to $2 billion, than let’s say from $1 trillion to $2 trillion. Small-caps tend to be fast-growing companies that can take more chances and respond to events and trends more efficiently than larger companies. Moreover, a recent analysis by MorningStar has revealed that small-caps look cheaper now relative to the broad market than at any time in the last 20 years.

But, of course, higher returns come with higher risks. Small-caps are highly vulnerable to macroeconomic factors and are thus more prone to market fluctuations, simply because they don't possess the same financial power as larger corporations, making it hard for them to survive unexpected emergencies. Additionally, these companies often have fewer outstanding shares, can’t borrow money as easily as bigger companies, and are more likely to have negative cash flows, leading to them paying lower or no dividends. They are also usually covered by fewer analysts and thus come with limited transparency and data for individual investors.

According to Marcio Silveira, a CFP, former equity analyst, and owner of Silvergreen Sustainable Investments:

“Since the 2010s, we’ve had some changes in how the economy works. All the top companies are tech companies now, and small-caps are underperforming because they can’t compete with these mega winner-take-all companies. You can find great opportunities in individual small-cap stocks, but you need to do a lot of fundamental analysis to find the hidden gems”

Nikola Corporation (NASDAQ:NKLA)

Upside Potential as of May 21st: 108.73%

Market Cap: $714.9 million

Nikola Corporation (NASDAQ:NKLA) is an American manufacturer of heavy-duty commercial battery-electric vehicles, fuel-cell electric vehicles, and energy solutions.

Nikola reported revenue of $35.84 million in 2023, down 27.9% from the $49.73 million reported in 2022. However, the Arizona-based company has set a target to deliver as many as 350 hydrogen-powered fuel cell electric trucks in 2024, after cost controls and its first revenue from the vehicles helped the startup post a smaller loss for the fourth quarter of last year. Analysts from Wall Street have maintained a Moderate Buy position on stocks of Nikola Corporation (NASDAQ:NKLA), with an average price target of $1.1, representing an upside potential of 108.73%, and thus ranking it among the Best Small-Cap Stocks in 2024.

At the end of the Q4 of 2024, 12 hedge funds held stakes in NKLA in the Insider Monkey database, with a collective value of approximately $55.75 million. One Fin Capital held the largest stake of 12 million shares, valued at almost $14.3 million.

 

Nikola Corporation (NASDAQ:NKLA) ranks 2nd on our list. To find out which stock ranks 1st, visit 8 Best Small-Cap Stocks Ready to Explode According to Analysts.

 

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.