Investors are wondering if Nikola Corp (NASDAQ : NKLA), could be on a similar path to Fisker Inc., who succumbed in June to pressures from the industry and declared bankruptcy.
Tesla has made significant profits for its early investors thanks to the first mover advantage it holds in the electric car (EV) industry.
Fisker, on the other hand, struggled to keep its financial stability and was unable to cope with a declining market.
What is Nikola’s position?
Nikola burns cash like it’s going out of style
Nikola faces financial difficulties that may spell doom for its investors.
Recent reverse stock splits by the company to keep its Nasdaq listing are a warning sign of potential weakness.
Nikola’s burn rate of cash is alarming. It has been operating at a negative cash flow for the last year, which amounts to approximately $459 millions.
At the end of its second quarter of financial reporting, the company only had about a quarter million in cash or cash equivalents. However, it had long-term liabilities and lease obligations of over $266,000.
Nikola also issued several convertible bonds, which when converted into common equity will increase its share count.
Nikola has announced plans to sell an additional 80 million dollars in convertible bonds, pending approval by shareholders.
The company will pay out $75.4 millions in stock-based compensation by 2023.
Although management expects a drop to around $30 million by 2024, that still represents more than 10% of Nikola’s current market cap.
Tesla Semi is a fierce competitor to Nikola, and threatens its trucking efforts.
Why should you purchase Nikola shares in September?
Investors are concerned about the company’s history of making overpromises and then failing to deliver.
Nikola had projected that it would deliver 3,500 battery-electric vehicles (BEVs), and 2,000 fuel cell electric cars (FCEVs) in 2023. However, only 79 BEVs were delivered and 35 FCEVs.
The firm’s revenue expectations have also fallen dramatically. It generated only $36 million in the last fiscal year, which is a dramatic drop from $1.41 billion that was expected.
There is still hope. Nikola announced an 80% rise in the number of hydrogen fuel-cell trucks it will deliver by 2024. This led to a four-fold revenue increase to $31.3 Million in its last quarter.
Wall Street has maintained an “overweight rating” on Nikola, with a price target of $16.80.
Investors are advised to proceed cautiously. Recent performance may show signs of improvement, but a few good quarters do not necessarily mean a trend.
Nikola’s stock price could continue to decline if the company experiences a deterioration in its financial performance.
The post: Nikola Stock: Potential millionaire maker or another Fisker This post may change as the updates unfold
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