Gut Punch: Analysts React To Trevor Milton's Departure From Nikola

What Happened: Nikola Corporation NKLA Founder Trevor Milton stepped down as the company's chairman and board member early Monday morning. The electric truck manufacturer's stock has been under pressure for several weeks following a short seller report from Hindenburg Research.

Milton had previously defended the company. The SEC and Justice Department have both started looking into Nikola.

The Big Takeaways: Wedbush analyst Daniel Ives, who has a Neutral rating on Nikola, calls the resignation 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.

Nikola signed a partnership with General Motors Company GM earlier this month, a move that sent shares sharply higher.

“Now it’s all about the executive going forward with the GM partnership, a linchpin to its success,” Ives said. “Nikola is still a prove me stock, which speaks to why we are watching from the sidelines with a Neutral rating."

The analyst has a price target of $45, which is 38 times 2025 estimated EBITDA. The price target also represents a multiple of 3.7 times estimated full-year 2025 revenue.

See Also: Stock Wars: Ford Vs. General Motors Vs. Tesla

JPMorgan analyst Paul Coster lowered the Nikola's price target from $45 to $41.

“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,” said Coster, who maintains an Overweight rating on the stock.

What’s Next: Milton, who served as Chairman of the Board, will be replaced by Stephen Girsky, current Nikola board member and former GM Vice Chairman.

“We believe the inbound Chairman, a former GM board member, is probably better suited to the next phase (execution) of the company’s development,” Coster said.

GM will continue to work with Nikola according to a spokesperson: "We acknowledge Nikola founder Milton's departure; Nikola, Honda and others represent just one part of our overall EV strategy; will work with Nikola to close previously announced transaction."

Price Action: The drop in Nikola is also impacting GM's stock and shares of CNH Industrial N.V. CNHI, which has a partnership and owns a stake in the company.

Shares of Nikola are trading down 15% to $28.89 at time of publicaiton. GM shares are down 6%, while CNH Industrial shares are down 8%.