Is Nikola the best penny stock to buy in March 2024?

By:
on Mar 15, 2024
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  • Nikola share price has collapsed by over 93% since going public.
  • The company is expected to continue burning substantial sums of money.
  • There is a likelihood that it will dilute its shareholders again.

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Nikola (NASDAQ: NKLA) stock price continued its strong downtrend this week as sentiment in the EV industry worsened. It was trading at $0.6370 on Friday, bringing the YTD losses to 27.25%. It has crashed by more than 61% in the past 12 months and by almost 95% since going public.

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Nikola faces significant dilution risks

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Nikola stock price has continued plunging amid more bad news for the EV industry. On Thursday, we reported that Fisker was considering bankruptcy as its cash burn continues. Fisker has denied the report.

Fisker’s collapse would come a few months after Lordstown Motors filed for bankruptcy. It would also open doors for other cash-burning companies like Nikola, Canoo, and Mullen Automotive to do the same.

Nikola is still burning an enormous amount of money. In the last quarter, the company said its revenue came in at $11.5 million while its net loss was over $153 million. Nikola has lost over $1 billion in the last five quarters.

Nikola has been a dilution machine for a long time. Its total outstanding shares have jumped from 29.6 million in 2018 to over 1.3 billion today. This means that people who have held the stock for a long time have lost almost all their money.

Nikola will need to raise more money this year even though it plans to ramp up the production of its hydrogen trucks. It plans to build between 300 and 350 trucks this year.

The most recent results revealed that its total cash and short-term investments stood at $466 million. If the cash burn continues, the company will likely need to either sell more stock or combine a share sale with a convertible bond. 

Nikola expects that its operating expenses and share-based compensation will be $310 million against revenues of $182 million. If it achieves this, it will have an operating income of minus $128 million.

Nikola is also spending substantial amounts of money in its recall program for its battery-electric truck. It has set aside about $45.7 million for this recall. 

Nikola stock price forecast

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Nikola stock

NKLA chart by TradingView

So, is Nikola the best penny stock to buy in March? I believe that Nikola is still a risky company even as it trades at a cheap price. On the daily chart, we see that the stock has continued its downward trend in the past few months. It is now hovering at $0.5832, its lowest swing on January 18th.

Nikola share price has continued falling below the 50-day and 100-day moving averages. Its accumulation and distribution (A/D) indicator has continued falling and is now at the lowest point on record.

Therefore, the outlook for the stock is extremely bearish, with the next target to watch being at $0.5232, its lowest swing in June last year. A break below that level will see it continue falling in the long term.

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