One of last year’s most troubled companies isn’t showing signs of a turnaround. Electric truck maker Nikola (NASDAQ:NKLA) doesn’t have much further to fall after losing 72% of its value over the past six months. But this week, the company received a noncompliance notice from the Nasdaq for failing to trade above the required $1 per share threshold.
This isn’t the first time the exchange has warned Nikola that it is in danger of being delisted. In late May 2023, the company received the same notice. It’s hardly surprising that NKLA stock hasn’t been able to demonstrate any real growth. But this news should be a warning for investors who still can’t see the big picture. This meme stock will only keep falling until Nasdaq gives it the boot.
What’s Happening With NKLA Stock
Despite the negative announcement, NKLA stock is still rising today. As of this writing, it is up 2%, though its trajectory has been fairly volatile. For investors, this marks a key opportunity to offload the unstable meme stock before it falls again. Even contrarian traders should know better than to hold a troubled company that has received two noncompliance notices in eight months.
Since charges of fraud took down Nikola founder Trevor Milton, the company has continuously proved unable to bounce back or even come close to its high prices of 2020. While Milton’s conviction likely tainted the company in the eyes of some investors, stronger firms could have rebounded and clawed their way back. Unfortunately, we’ve seen the opposite from Nikola, whose finances remain highly questionable on a good day and truly discouraging on a normal one. As InvestorPlace contributor Muslim Farooque reports:
“Financially, with recent reports showing a sharp decline, the company’s non-GAAP earnings per share fell to negative 30 cents, missing forecasts by 16 cents. Additionally, revenue significantly dropped to -$1.73 million from last year’s $24.21 million, a shortfall of $9.34 million. These data points underscore the company’s ongoing struggles and challenges in the market.”
Fellow contributor Thomas Niel predicts the company could be destined for even more losses, urging investors to bet against NKLA stock. He compares Nikola to troubled EV producer Mullen Automotive (NASDAQ:MULN), speculating that both will remain in a “dilution spiral.” Given how much both companies have struggled lately and proved unable to demonstrate even marginal growth, that comparison is certainly appropriate.
The Road Ahead
On Saturday, Jan. 20, FreightWaves reported that despite Nikola receiving the second Nasdaq warning, there appeared to be no signs of panic. While that’s true, investors should be careful to see this story for what it is — an opportunity to sell NKLA stock before it slips back into the red again. Even the meme stock moment likely carrying it today won’t continue. When it inevitably fades, NKLA will likely continue falling until Nasdaq brings down the axe and it loses its spot on a major exchange.
When a meme stock is delisted, it often begins trading over-the-counter (OTC). But just because it still trades doesn’t mean it can grow. Bed Bath & Beyond never recovered after losing its spot on the Nasdaq. Unless something drastic happens, there’s nothing to suggest that Nikola can avoid this fate. Any way we look at it, NKLA stock is on its way out.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
