The Nikola (NASDAQ: NKLA) stock price continued its deep sell-off this week and moved to its all-time low as concerns about its business accelerated. It plunged to a low of $7.40 on Monday, bringing the year-to-date losses to almost 72%. It has dropped by almost 98% in the past five years, bringing its market cap from almost $30 billion to $370 million today.
Can Nikola survive?
The trucking industry is one of the most important one globally since it facilitates all types of trading. It is also a highly consolidated industry that is dominated by companies like Daimler Trucks, Iveco, and PACCAR.
The industry is going through major changes as concerns about carbon emissions continue. Some companies like Tesla have already launched electric semi trucks that are being used by companies like Pepsi and Walmart.
Electric semi trucks have a big issue in that their battery packs are often very heavy, leaving little room for substantial cargo. There are also concerns about range, especially in cold weather and charging infrastructure in the country.
Therefore, many fleet companies have been a bit hesitant to buy electric trucks, which are often more expensive than diesel. It also takes much longer to charge these trucks because of their heavy battery packs.
Nikola believes that hydrogen is the future of trucking and has launched its hydrogen fuel truck that it hopes will become a market leader.
Some analysts believe that green hydrogen can be a good replacement of diesel. In Nikola’s case, its truck has a maximum range of 500 miles, has 536 horsepower, and can refuel in less than 20 minutes.
Hydrogen trucks have several challenges. To customers, they are highly expensive to buy, with one truck costing over $400,000. Even with government incentives, these trucks are more expensive than diesel ones.
The other challenge is that the price of hydrogen is more expensive than diesel and there is a lack of fueling infrastructure. Nikola has started building refueling stations in busy routes such as in Ontario, Alberta,and California. It has also come up with HYLA, its comprehensive fueling ecosystem.
Cash is a big issue
Nikola has already started to sell its hydrogen trucks. In the first quarter, it produced 43 trucks, generating revenues worth $7.5 million and a net loss of over $147 million, an improvement from the $169 million it lost in the same period in 2023.
Nikola will likely continue to make losses in the coming years as it ramps up its investments in infrastructure. While truck sales are expected to push its revenues to $125 million this year and $429 million in 2025, losses will remain elevated. Analysts expect that the loss per share will be $10.8 and $8.43 in the next two financial years.
Nikola’s challenge is that its balance sheet is not all that strong and that it will likely need to raise cash either this year or in 2025. Its cash and equivalents in the last quarter stood at $345 million, down from over $446 million in the same quarter a year earlier.
That means that the cash will likely run out later this year, forcing the company to look for additional cash.
Nikola stock price forecast
The daily chart reveals that the NKLA share price has been in a freefall, which forced the management to do a reverse stock split this week. This split was necessary for the company to maintain its Nasdaq listing.
The stock has now crashed below the key support at $15.73, its lowest level in June 2023 and in May this year. It has constantly remained below the 50-day and 100-day Exponential Moving Averages (EMA), meaning that it bears are in control.
Nikola stock price has also become highly oversold, with the Relative Strength Index (RSI) moving to 22. The Money Flow Index (MFI) has also moved below the neutral level of 50.
Therefore, the stock will likely continue falling as dilution risks continue. This means that it could drop to $5 soon.
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