Nikola’s (NASDAQ:NKLA) disturbingly weak quarterly results should send a red flag to investors. The vehicle maker barely posted any revenue, as analysts took a risk by reiterating either “hold” or “buy” calls for Nikola stock.
If wary investors think twice about speculating, chances are low that Nikola stock will rebound back to pre-earnings highs. The days of the stock trading in the $70 – $93.99, as it did in June, are remote.
In the second quarter, Nikola posted an adjusted EBITDA loss of $46.98 million. It posted only $36,000 of solar revenue. The company tried to shine a bright outlook by mentioning its field testing of the fuel truck.
Nikola has a milestone with Anheuser-Busch (NYSE:BUD) to deliver some test fuel cell vehicles by 2021. Chief Executive Officer Mark Russel said that he believes the company will be able to give them test prototypes by the agreed date. Further, he said that mass production of the model will not start until 2023.
Investors will have to wait almost three years before the company reports any meaningful revenue. The only positive point Russell made was that Anheuser-Busch is a risk-sharing partner. So, investors will face fewer risks should Nikola come across higher costs or delays.
The Badger Vehicle and Nikola Stock
Nikola supplied no details on how many OEM potential partners it has for the Badger vehicle.
“This Badger story is just incredible, because I mean, we – a year ago, we didn’t believe we’d be building a pickup truck. We had some concepts,” CEO Russel said. “We have a great design team and Trevor is extremely creative with this stuff.”
Comparing its truck to the inferior look of the Tesla (NASDAQ:TSLA) Cybertruck, Russell explained how positive people reacted to the designs.
After putting the design on the website, the company garnered over 89,000 sign-ups. Unfortunately, the company recorded only registrations on the website. It did not collect any deposit. If Nikola did get between $250 and $5,000 each, then the sharp run-up of the stock to a ~$36 billion valuation ($93.99 times 378.98 million shares outstanding) would have been partly justified.
Hydrogen Stations and Other Headwinds
Nikola recently signed a purchase order with Nel ASA (OTCMKTS:NLLSF),for 85-megawatt alkaline electrolyzers. This would support eight tons a day of hydrogen fueling stations (40,000 kgs of hydrogen daily).
The deal cost Nikola $30 million. It will enable the company to cover multiple states and trucking routes. The company started its partnership with Nel in 2017. And because it filed to sell up to 23.9 million shares, its cash on hand will give it plenty of buying power to expand its network.
Nikola did not give many details about the number of upcoming initiatives. Chief Legal Officer Britton Worthen said on the conference call that it will announce several initiatives over the next six months.
The lack of any news in the near-term may sustain the selling pressure. Still, if the company posts any revenue-generating deals to justify its multibillion-dollar market capitalization, the stock might stop falling.
According to simplywall.st, analysts forecast revenue topping over $2.4 billion in 2024. Its EPS loss will still be around 52 cents, a sharp improvement from the $2.60 a share loss this year.
If management believed in its prospects, investors might wonder why insiders sold around $215.2 million, or 5 million shares, in the last three months. For example, WI Ventures LLC sold those shares for $51.72 on July 8.
Your Takeaway
Nikola will look like a bargain stock for novice investors relying only on the stock chart since June. Shares started at $30, spiked to $93.99, and then fell to the $30 – $40 range in July.
Relative to its peak, the stock looks cheap. Fundamentally, the company is the result of a reverse merger with VectoIQ. It has no truck product on the market yet. Even if it did, it would not post profits until after 2024 at the earliest.
Serious investors should not get stuck holding shares. Let speculators buy and sell on Nikola’s stock volatility.
Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities.
