Entering 2024, while the broader market danced to the tune of “record highs,” the green energy startups found themselves waltzing to a different, less jubilant rhythm – one that led them down the winding road to fresh nadirs. Notably among them stands Nikola (NKLA), a fallen idol that may someday serve as a poster child in the annals of the electric vehicle (EV) bubble.
As one of the early birds to seize the special purpose acquisition company (SPAC) trend in 2020, Nikola rode in as a standard-bearer of the renewable energy fervor – akin to GameStop (GME) amidst the meme stock mania.
Peaking in 2020 with a market cap that dwarfed Ford Motor (F), Nikola unwittingly became a harbinger of the impending bubble in the EV industry – a warning that went unheeded as the company had yet to deliver a single vehicle.
Since its meteoric rise, Nikola’s capital trajectory took a nosedive, currently languishing with a market cap south of $350 million. As the company prepares to unveil its Q2 earnings, the question looms – what awaits inside the report, and is NKLA stock worth the plunge?
Predicting Nikola Q2 Earnings
Analysts’ crystal balls foresee Nikola reporting revenue of $24.6 million for the June quarter, marking a 60.5% upswing from the same period last year. With 72 Class 8 hydrogen fuel cell trucks finding new homes with wholesalers in Q2, Nikola outpaced its guidance expectations.
Prognostications hint at a net loss of $120.6 million in Q2 – a 13.4% year-over-year escalation. For fledgling green energy players, residing in the red is commonplace, with Nikola incessantly seeking cash injections from the capital well.
NKLA’s Quest for Volume
Profit isn’t foremost in Nikola’s war room; the focus is squarely on survival. Initiating a reverse stock split in June to tick the boxes for listing requirements, management indicates a willingness to compromise on pricing to rev up initial sales.
CFO Tom Okray reinforced during Nikola’s Q1 2024 earnings briefing, stressing that profitability hinges on scaling up operations. Different from Tesla’s margin-centric approach, Nikola, battling losses and a shaky balance sheet, can’t afford such luxuries.
Predictions for NKLA Stock
A niche flock of 5 analysts covers Nikola, of whom only 1 waves the “Strong Buy” flag while the rest opt for “Hold.” Yet, the mean target price of $18.01 offers a ray of optimism, standing at over 145% above Wednesday’s closing bell.
Although Nikola has reshaped its business blueprint to focus on commercializing hydrogen truck technology and bolstering infrastructure under the Hyla brand, it’s a gamble that could pay off handsomely if the hydrogen economy gains momentum.
Caveats for Nikola Shareholders
Nikola investors must tread cautiously, eyeing execution risk as the company strives to sell its unproven hydrogen fuel truck technology – a product not universally embraced, even by luminaries like Elon Musk.
A looming specter arises in the form of potential policy shifts, with a Donald Trump resurgence threatening to tip the scales in favor of fossil fuels over green energy. Yet, the push toward cleaner fuels remains unyielding, regardless of the political climate.
Lastly, Nikola’s wobbly financial foundation, perpetually hemorrhaging funds, casts a shadow of doubt over its future trajectory, with the sword of bankruptcy hanging perilously close. In a volatile market, financially frail entities might find themselves pawned off for more robust equities.
Despite appearing modestly priced with a next 12-month price-to-sales multiple of 1.66x, Nikola’s woes hint at caution. While risk-takers with a hearty appetite might be enticed by the current risk-reward proposition, prudence is warranted in the face of Nikola’s unfolding narrative.
