Nikola Corporation (NASDAQ: NKLA), known for its hydrogen fuel-cell trucks, has faced a challenging year in 2024, with its stock plummeting by 69% thus far. This decline continues a trend of underperformance for the company, which has struggled with various controversies and operational hurdles in recent years. Despite these challenges, there are signs that Nikola might be poised for a rebound, as indicated by recent commentary from analysts.
Analyst Perspective
Ben Kallo, an analyst at Baird, has adopted a bullish stance on Nikola following the company’s second-quarter (Q2) earnings report. Kallo believes that long-haul trucking represents a prime application for hydrogen technology, especially as the market for zero-emission transportation grows. He highlights Nikola’s first-mover advantage in this emerging sector, suggesting that the company is well-positioned to benefit as production ramps up and demand for fuel-cell electric vehicles (FCEVs) increases.
Financial Performance and Forecast
Nikola’s Q2 report showed a significant improvement in its financial metrics. The company achieved record quarterly revenue of $31.32 million, a remarkable 103.9% increase year-over-year, surpassing Wall Street’s forecast by $5.13 million. This revenue growth is driven by higher average selling prices (ASPs) as Nikola scales up production to meet rising demand for its FCEVs. On the earnings front, the company reported an adjusted EPS of -$2.67, which was slightly better than analysts’ expectations by $0.06.
The company is also making strides in expanding its hydrogen fueling infrastructure. Nikola aims to establish 14 hydrogen fueling stations by the end of the year, having already commissioned seven. Kallo views this expansion as vital for increasing the adoption of Nikola’s vehicles and supporting the company’s growth strategy.
Financial Health and Challenges
Despite these positive developments, Nikola faces significant challenges regarding its financial health and liquidity. The company’s unrestricted cash and equivalents fell to $256.3 million at the end of Q2, down from $345.6 million at the end of Q1. This reduction in cash reserves raises concerns about the company’s ability to sustain operations and fund its expansion plans.
Kallo suggests that Nikola has several options to improve its liquidity, including:
- Sale Leaseback of Facilities: Nikola could sell and lease back its Coolidge facility, unlocking cash while continuing to use the facility.
- Grants and Incentives: The company has recently gained traction with grants and incentives, which could provide additional funding.
- Monetization of Non-Core Assets: Selling off non-core assets could generate cash.
- Opportunistic Capital Markets Activity: Nikola could seek capital through equity or debt offerings if market conditions are favorable.
Stock Rating and Price Target
Kallo rates Nikola’s stock as Outperform (equivalent to Buy), with a price target of $14. This target implies a potential upside of 66% over the next 12 months. His optimistic view is based on Nikola’s potential to recover and grow despite its current difficulties.
However, Kallo’s positive outlook is not universally shared. Among other analysts, only one shares his bullish perspective on Nikola, while four additional analysts rate the stock as Hold (Neutral). Overall, Nikola’s stock has a Moderate Buy consensus rating, with an average price target of $16, suggesting a possible 99.5% return over the next year.
Conclusion
Nikola Corporation is navigating a challenging period marked by significant stock declines and financial pressures. Nevertheless, the company’s recent operational improvements, strategic expansions, and the bullish outlook from analysts like Ben Kallo provide a glimmer of hope for investors. As Nikola continues to develop its hydrogen fuel-cell technology and infrastructure, the potential for a stock rebound remains a topic of interest, particularly if the company can effectively address its liquidity issues and capitalize on its growth opportunities.