Nikola’s (NKLA), stock continued to fall even though the company had published positive financial results, and Federal Reserve hinted at possible rate reductions in September. The stock price has fallen by more than 22% over the past 30 days. This brings the losses for the entire year to 71%, and the market capitalization to $379,000,000.
Nikola has made progress
Nikola’s results from the past few months showed the company making great progress in its quest to be a leader of the hydrogen-powered truck industry.
It has also received carbon sales.
The company shipped 77 vehicles in the third-quarter and 120 in the first six months of this year. This is a remarkable number for a new company, which has only recently begun selling hydrogen-powered vehicles. The company expects to ship between 300-350 trucks in this year.
The company made $31 million in revenue for the third quarter. This is higher than its $15 million in revenues from the same time last year. Nikola, as expected, lost money on each truck sold. This is why the gross loss of $54 millions. Analysts predict that the company’s revenue for this year will be around $133 millions, followed by $415million next year.
The company’s net loss decreased from $217 to $133 and is unlikely to be profitable anytime soon. The company’s expected net loss is 10.2 cents per share this year, followed by 7.68 next year. Most automakers, such as Rivian Motors, Lucid Motors and Nio, take several years to turn a profit.
Major challenges remain
Nikola’s progress is admirable. The company is facing substantial challenges which will affect its stock price over time.
Nikola will have to increase cash flow again. The company ended the third quarter with unrestricted funds of $256 million, which means that they need to do something to improve their cash situation.
Nikola requires money to pay its employees, continue research and development and expand the HYLA programme. HYLA, a Nikola service that offers companies within its ecosystem modular hydrogen fueling stations. By the end of this year, the company hopes to operate 14 hydrogen fueling stations across North America.
Nikola announced recently that they would be selling up to $160 Million in convertible senior notes. Net proceeds from the first round of fundraising are $74.3 Million.
However, the reality is that Nikola’s cash burning isn’t a new phenomenon. Nikola has increased its outstanding share count from 1 million to 48.47 millions in a short period of time.
Second, Nikola’s hydrogen truck is still in testing. Companies are still experimenting. Tom Okray said the following in the earnings call:
They do a demonstration, they say give me 5 or 10, and then they know that vouchers are available. The demo is done, then the customer says, “Give me five or ten, and I’ll give you vouchers.” They use vouchers to try different routes or cycle in California.
There is the risk that they will continue to use their diesel trucks because running hydrogen vehicles is expensive. The company reported that in its latest quarter the average price of the truck rose $7,000, to $381,000, while a diesel truck costs less than $300,000.
Fuel costs may also make it difficult for the company to bring fleets into its ecosystem. Diesel costs on average between $3 and $5 per gallon, while hydrogen is between $10 and $15 per kilogram.
It is believed that in most cases a truck powered by diesel costs about 57c per mile, while hydrogen trucks cost $1.33. Since fleets have low margins, they will delay buying these trucks.
Nikola stock price analysis
Nikola is facing major challenges and its stock price may fall further as in the past.
It has nevertheless formed a pattern of a falling wedge, shown in red. This is usually one of the bullishest patterns on the market. Nikola has a high shorting interest with almost 20 percent.
Shorting the stock is therefore risky.
The post Nikola Stock: Short Interest, Falling Wedge, Points to a Short Squeeze may be updated as new information becomes available
