Electric vehicle producer Nikola (NKLA) is attempting to rebound from a steep share price decline of over 97% in the past three years, culminating in a 1-for-30 reverse stock split to avoid delisting by NASDAQ. Ascending from the ashes is a rare feat, However, the company has shown resilience, announcing better-than-expected vehicle deliveries for the quarter and creating anticipation for the company’s upcoming fiscal results. Speculation around a potential short squeeze is also in play.
Still, long-term investors may want to hold off until the company can demonstrate sustained progress in revenue and earnings while shoring up its balance sheet.
Nikola’s Resurgent Sales
Nikola Corporation specializes in the commercialization of electric vehicles (EVs) with a focus on battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles (FCEVs) for the trucking industry.
The company recently announced it has exceeded its Q2 sales guidance with the wholesale of 72 Class 8 Nikola hydrogen fuel cell trucks under the HYLA brand. This achievement follows 40 hydrogen fuel cell trucks in the first quarter. New and repeat customers, including Walmart Canada, 4GEN, and IMC, have contributed to these robust figures, highlighting Nikola’s growing influence in the zero-emissions truck market.
The hydrogen fuel cell truck market is projected to reach $3.7 billion by 2032, growing at a CAGR of 36% from 2023 to 2032.
Nikola’s Recent Financial Results
The first quarter’s financial results showed mixed results, with revenue of $5.5 million missing consensus expectations of $15.79 million. With a net loss of $147.72 million, delivering adjusted earnings per share (EPS) of -$0.09, which was in line with analysts’ projections.
At quarter-end, the company reported a $119.1M drop in unrestricted cash and cash equivalents, attributed to the BEV and FCEV inventory ramp-up. This left the company with reported cash and cash equivalents of $345.6 million. The company may need to raise additional capital soon at that cash burn rate, potentially leading to shareholder dilution.
What Is the Price Target for NKLA Stock?
The stock has been on a downward slide, shedding 63% year-to-date. It trades at the low end of its 52-week price range of $7.25 – $111.30 and, despite an uptick in the past week or so, continues to show negative price momentum by trading below the 20-day (10.51) and 50-day (13.42) moving averages. With roughly 23% of its outstanding float sold short, Nikola has the potential for substantial price movement come early next month when the latest quarter numbers are announced, should positive news create enough upward momentum to create a short squeeze.
Analysts following the company have taken a cautious stance on the stock. For instance, Baird analyst Ben Kallo recently lowered the price target from $60 to $14, maintaining an Outperform rating on the shares. He cited the company’s reported Q2 deliveries of 72 FCEV trucks.
Overall, Nikola is rated a Moderate Buy based on six analysts’ recommendations and recently issued price targets. The average price target for NKLA stock is $5.40, representing a potential -44.04% change from current levels.
Bottom Line on Nikola
Nikola has proven its resilience, battling a significant share price drop and the threat of being delisted from NASDAQ. The company has demonstrated promising progress, reporting better-than-expected vehicle deliveries recently. However, mixed financial results, a high rate of cash burn, and potential shareholder dilution from fundraising efforts underscore the need for Nikola to fortify its financial standing.
Despite the stock’s downward trajectory, there’s potential for a turnaround bolstered by strong quarterly results and the possibility of a short squeeze. Yet, ultimately, long-term investors should closely monitor the company’s revenue, earnings, and balance sheet to look for overall progress before entertaining the stock.
