Nikola (NKLA) stock price has imploded as the company continues to face commercialization and balance sheet concerns. It has crashed by 87% this year and is trading at its lowest level on record, giving it a market cap of over $200 million.
Nikola stock and the future of hydrogen vehicles
The auto industry is going through major changes as the decarbonization trend continues. In the passenger sector, companies like Tesla, BYD, and Rivian have continued to ship thousands of vehicles each quarter.
The challenge, however, has been in the trucking industry, which is an important part of the American economy.
Unlike passenger vehicles, trucks carry substantially heavier products, making electric trucks less viable. Years after Tesla started shipping its semi truck, the company has only shipped a handful of them.
Nikola is aiming to become a leading player in the trucking industry by focusing on hydrogen trucks. Most analysts believe that hydrogen trucks would be a better alternative to electric trucks because of the energy density.
The challenge, however, is that these trucks are highly expensive compared to diesel trucks. Data shows that the average hydrogen truck sells for over $350,000, much higher than the average diesel truck that costs less than $200,000.
Additionally, the cost of filling hydrogen trucks is much higher than diesel. In an industry with low margins like transport, most people are opting for the diesel trucks that they are familiar with.
Most importantly, the infrastructure needed to deliver hydrogen energy is not available. As a result, Nikola has come up with HYLA, a modular solution for its customers in places like California and Ontario.
All these factors, coupled with the cost involved, explain why the Nikola stock has imploded, costing investors billions of dollars.
Read more: Nikola stock: potential millionaire maker or another Fisker?
Nikola has made some progress
Still, despite the challenges, Nikola has made some progress as evidenced by its most recent financial results.
It delivered 88 trucks in the third quarter, a 22% increase from the previous quarter. Most of these vehicles were sold to fleet companies, who are likely experimenting on them. Some of its recent clients are companies like Diageo and DHL.
Nikola hopes to deliver between 300 and 350 hydrogen trucks this year, a move that will push its revenues higher.
The quarterly results showed that revenues jumped to $25 million, a trend that may continue in the coming months.
This growth, however, came at a big cost as the company recorded a gross loss of $61 million and a net loss of almost $200 million.
While these loss figures were better than in 2023, they mean that the company will need adequate funds going forward.
Nikola ended the last quarter with $198 million in cash and equivalents, down from $464 million in December, meaning that the cash burn has accelerated. It had inventories of $76 million and $3.3 million in restricted cash and equivalents.
These funds will likely not be enough to keep the company running for a long time. Nikola still has some avenues to raise money.
For example, it can still turn to the Department of Energy (DoE) as it did last year. Odds of these DoE financings during a potential Trump administration are low.
Also, it can raise funds by selling convertible bonds. The company can also sell some of its shares, a move that will continue to dilute its shareholders. Besides, the number of outstanding shares has jumped from less than 1 million in 2020 to 55 million today.
The challenge is that an ATM raise seems highly difficult since Nikola is now valued at over $200 million. It will likely need more money than that to continue as a going concern.
We have seen this situation before. A good example of this is Rivian, a company that makes highly popular SUVs and trucks in the United States. Rivian’s annual revenue has risen from $55 million in 2021 to over $5 billion in the trailing twelve months.
Despite this growth and popularity, the company has continued making losses and has had to be bailed out by Volkswagen. It has also diluted its shareholders in the past few years. This means that Nikola will continue facing similar challenges.
Nikola stock price analysis
NKLA chart by TradingView
The daily chart shows that the NKLA share price has been in a strong bearish trend and is at its lowest level on record. It has dropped below the important support at $3.75, its lowest level on October 18.
The stock has crashed below all moving averages, meaning that bears are in control. Also, the Relative Strength Index (RSI) and the MACD indicators have continued falling.
Therefore, the outlook for the NKLA share price is bearish, with the next point to watch will be at $2. However, with its short interest being at 23%, there are chances that the stock may have a short squeeze soon.
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