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Nikola (NKLA) stock price analysis: time to be contrarian?

By: Invezz
nikola stock could triple baird analyst says

Nikola (NASDAQ: NKLA) stock price has continued its sell-off this year as investors rotate to Internal Combustion Engine (ICE) companies like Toyota and Honda. The stock has retreated by over 20% and is hovering near its lowest point in 2023. It has crashed by more than 95% from its all-time high.

Continues to disappoint

Nikola has been one of the most disappointing automakers in the past few years. It and its founder, Trevor Milton, were accused of fraud and the company has been a cash-burning machine. The company has also been highly dilutive, a move that has pushed its outstanding shares from 29.5 million to almost 1 billion.

The most recent results, published in November, showed just how far the company has fallen. Its net loss surged to more than $425 million in the quarter, up from$175 million in the same quarter in 2022. This loss was because of its investments and a recall for its BEV trucks. 

As part of the recall, the company is now replacing all battery packs and replacing them with those from alternative companies. The cost for this recall is enormous considering that it is spending about $300k per truck. 

Further, the company expects to deliver fewer trucks than expected. Its guidance was to deliver in the last quarter to between 30 and 50 trucks, much lower than it had guided. In this case, it expects its revenue to be between $11.2 million and $18.7 million. This range means that it prices its trucks at about $375k.

The biggest challenge for Nikola is that it will likely need to raise additional capital this year. For one, its gross margin is between -235% and -135%, meaning that its losses will likely remain high as it invests in growth.

Nikola has a long track record of dilution, as mentioned. The most recent cash raise was through a combination of equity and convertible debt. It ended last quarter with access to capital of about $705 million, meaning that it could drain most of these funds soon. Analysts at Baird expect that the firm will burn $540 million this year.

Nikola also finds itself in an industry that is not being loved by investors as most of them are dumping clean energy companies.

Nikola stock price forecast

Some analysts believe that Nikola’s bad news have been priced in by market participants. Those at Baird believe that the stock has room to jump sharply this year as the company improves its processes. Also, it has a new management while the price of hydrogen is set to continue falling in the near term.

While I believe that Nikola has more downside in the coming months, there are risks of shorting the company. For one, as shown above, the stock has failed to move below the important support at $0.5790. 

Also, further data shows that the company has a short interest of over 29%, meaning that it can become a good candidate for a short squeeze. This squeeze could happen on February 22nd when the company publishes its financial results. Therefore, it is both risky to buy or go short the company.

The post Nikola (NKLA) stock price analysis: time to be contrarian? appeared first on Invezz

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