Nikola (NASDAQ:NKLA) plunged by more than 15% in trading after the company announced a 1-for-30 reverse stock split, effective as of June 24 at 4:01 PM Eastern Time. The manufacturer of commercial EVs is undertaking this reverse stock split to comply with Nasdaq (NDX) listing rules. Starting from June 25, NKLA stock will trade on a split-adjusted basis.
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Why is the Stock Split Important?
A reverse stock split usually boosts a company’s stock price by reducing the number of outstanding shares, helping it avoid delisting from an exchange. Nikola has stated that no fractional shares will be issued as a result of the reverse stock split.
NKLA stock has been in a downward spiral over the past year, plunging by more than 65% as the company’s Q1 revenues of $7.49 million fell short of analysts’ consensus estimates of $15.78 million.
Is NKLA a Good Stock to Buy?
Analysts remain cautiously optimistic about NKLA stock, with a Moderate Buy consensus rating based on two Buys and five Holds. The average NKLA price target of $1.10 implies an upside potential of more than 100% from current levels.
