The plot has thickened for Nikola (NKLA) stock price as it tumbled to a record low on Thursday after the company announced a big reverse split. It crashed to $0.3270, bringing the year-to-date losses to over 60%. Over time, the company’s market cap has tumbled from more than $20 billion to about $652 million today.
Nikola stock split
In a statement on Thursday, Nikola said that its board had agreed to engineer a 1-to-30 reverse split in a bid to maintain its Nasdaq listing. According to Nasdaq listing rules, a company must maintain a stock of over $1 for a certain period.
Nikola’s situation happened even as the company made some important progress in its operations as I have noted before. It has started to ship HYLA, its hydrogen truck and its revenue has started to rise.
Analysts believe that Nikola’s annual revenue will surge by almost 240% this year to $121 million and hit $428 million in 2025. If this happens, the company will transition from being a big laggard to one of the fastest-growing firms in the industry.
The challenge, however, is that Nikola’s growth will happen at a cost. Its total free cash outflow jumped to over $414 million in 2023 and $89 million in the last quarter.
Further, the company’s net loss came in at over $147.7 million and over $1.1 billion in the past five quarters.
Nikola would be able to weather this loss-making streak if it had a strong balance sheet. Unfortunately, the company does not have this luxury since its cash and short-term investmentsstood at over $349 million, down from $466 million in the previous quarter.
All this means that Nikola will need to raise funds again, either this year or in 2023. As you recall, the company raised over $100 million in 2023 through a combination of equity and convertible bonds.
The company will likely need an innovative way to raise funds now that its market cap has crashed hard in the past few months to just $652 million, meaning that its room to sell equity is narrowing.
I have noted about other issues with Nikola before. In addition to its balance sheet, the biggest issue is that its trucks and their maintenance are highly expensive, meaning that most fleet companies will likely keep off.
The cost of fueling a hydrogen truck is more expensive than a diesel one while the infrastructure is not adequate.
Nikola stock price forecast
Turning to the daily chart, we see that the NKLA share price has been in a strong bearish trend. It then made a bearish breakout as it moved below the key support level at $0.5113, its lowest point in June last year.
Nikola shares have remained below all moving averages while the Relative Strength Index (RSI) has drifted downwards. Therefore, the stock will likely continue plunging in the coming weeks as sellers target the support at $0.20.
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