As the saga of Nikola (NKLA) unfolds through the turbulent stock market waters of 2024, the electric vehicle (EV) startup continues to grapple with a dwindling stock price, shedding over 12% of its value. A deeper dive reveals a stark reality – over the last three years, Nikola has witnessed an alarming plunge, losing nearly 95% of its market value. Once a darling of the meme stock era, Nikola now stands as a shadow of its former self, surrounded by a cloud of uncertainty yet intriguing retail investors hopeful of a potential turnaround.
However, laced with apprehensions, many foresee a grim fate for the company, camping at the doorstep of bankruptcy. A dark cloud looms over the green energy startup landscape as several compatriots, namely Arrival (ARVLF), Bird Global (BRDSQ), Lordstown Motors (RIDEQ), Electric Last Mile Solutions (ELMSQ), and Proterra (PTRAQ), have succumbed to the perils of insolvency in the last two years.
These fallen comrades all shared a common thread – a journey to the public domain through a special purpose acquisition company (SPAC) merger, a bandwagon that once embraced Nikola in 2020. Riding high on speculative fervor, Nikola briefly outstripped Ford Motor (F) in market capitalization that year, a harbinger of the impending bubble in the EV industry. The industry’s euphoric crescendo hit a crescendo as Rivian scaled market cap peaks exceeding $150 billion, and Tesla (TSLA) soared past $1.2 trillion, towering above all automotive counterparts combined. The tale took a grim turn in 2022, as the Federal Reserve unleashed an unprecedented wave of rate hikes, pulling the plug on the financial lifeline nourishing these embryonic green energy entities, and triggering a sector-wide plunge.
The EV Bubble Has Definitively Burst
EV stocks, once buoyed by exuberance, found themselves caught in a maelstrom as macroeconomic vagaries besieged the sector in 2022. Despite green energy startups pointing to punitive macros such as escalating interest rates and a broader economic deceleration, Nikola’s tribulations transcend these overarching maladies.
In a damning turn of events, accusers such as Hindenburg Research unearthed a trail of fraud allegations against Nikola, citing misrepresentations regarding the capabilities of their vehicles. This storm culminated in the ignominious exit of founder Trevor Milton, found guilty of perpetuating deceit. Ironically, Hindenburg Research’s fingers also pointed towards Lordstown Motors in 2021, a saga that culminated in bankruptcy due to a fiscal abyss stemming from operational insufficiencies.
NKLA Is a Much Different Company Now
Standing at a crossroads, Nikola has embarked on a transformational voyage, disentangling from Milton’s shadows. Shedding vestiges of the past, Nikola divested its Badger pickup truck program, bid adieu to European forays, redirecting focus towards hydrogen fuel cell electric trucks and HYLA infrastructure solutions in Californian and Canadian markets.
The coffers reveal a silver lining – Nikola boasts $464.7 million of unrestricted cash at the close of 2023, a two-year high, fortifying the wobbly financial scaffolding. Nonetheless, this war chest has come at a cost – a bloated outstanding share count, escalating nearly threefold to a staggering 1.16 billion since the SPAC merger. Accompanying this cash-infusion tango, Nikola has wielded stock-based compensation liberally, dishing out $75.4 million in 2023, roughly 10% of its current market cap. While foreseeing a dip to $30 million in 2024, this financial maneuver remains hefty for a company of its stature.
The volatility isn’t limited to the balance sheet; the C-suite mirrors organizational whirlwinds, witnessing four CEOs in as many years, coupled with a swift exit by CFO Anastasia Pasterick after a scant 6-month stint.
Nikola Stock 2025 Forecast
Breathing a semblance of hope, Nikola’s CEO Steve Girsky, in the wake of Q4 2023 earnings, donned an optimistic cloak for the company’s 2025 trajectory. Amplifying vehicle prices and slashing production costs loom as the salvation mantra – a recipe envisioned to birth a positive cash contribution margin per truck come 2025.
Asserting a bullish stance, Girsky underscores unfettered demand and a buoyant outlook, confident in matching production with market appetite, visualizing an EBITDA breakthrough in 2025. Stating a moratorium on capital raises in the foreseeable future, Nikola paints a picture of transient financial stability.
While buoyed by a capital infusion and a curtailed cash burn horizon, Nikola’s trajectory remains fraught with risks. Teetering between a phoenix-like resurgence or impending doom, the stakes are too high to wager on NKLA as a multibagger prospect.
Albeit a more focused narrative, channeled towards market consolidation and capital efficiency, NKLA stock remains a high-risk mosaic. Opting for tried-and-tested luminaries in the startup green energy realm seems a prudent call, steering clear of the tempestuous Nikolas of the stock market arena.