Nikola stock price faces these risks in 2024

Nikola (NASDAQ: NKLA) stock price came under strong sell-off pressure this week as it erased some of the gains made in March. It has crashed by 17% in the past five trading days, pushing it below the important support level at $1. 

Nikola is beating peers this year

Still, Nikola has outperformed other companies in the electric vehicle industry this year. Its stock is down by 1.35% YTD while companies like Tesla, Lucid Motors, Nio, and Li Auto, which have dropped by more than 30% this year.

Tesla vs Nikola vs Rivian stocks

Nikola has made a lot of progress in a difficult market. In a statement this month, the company said that it had developed 43 trucks in the first quarter and sold 40 of them. This was notable progress considering that the company manufactured 35 vehicles in the fourth quarter.

Nikola hopes to continue ramping up its production this year as it seeks to grow its revenues. It made over $11 million in the fourth quarter, meaning that its first-quarter revenues could move to over $14 million. 

Nikola’s stock increase in March also happened in line with the performance of the trucking industry. Most trucking companies like Daimler Trucks, Iveco, and PACCAR have seen their stock prices surge to their all-time highs.

Nikola stock risks

However, there are some significant risks for investing in Nikola. For one, the compensation plan seems to be benefiting its insiders. While the stock price is down by over 26% in the past 12 months, the CEO pocketed $8.2 million in compensation.

This means that he earned more money than the CEOs of other trucking companies. Martin Daum, the CEO of Daimler Truck made between $2 million and $5 million last year. The CEO of Iveco makes about $7.2 million annually.

This trend is common in many loss-making companies in the US. For example, it was recently reported that the CEO of Canoo made over $1.5 million in 2023 and $1.7 million on his private jet.

The other challenge is that of demand and issues surrounding hydrogen trucks. Hydrogen trucks tend to cost more than diesel ones. For example, the company made $11 million in Q4’23 after selling 35 trucks, meaning that each one averaged $329k. 

Diesel trucks cost much less than that while the 500-mile Tesla semi truck starts at $160k. Also, the fueling infrastructure is still not all that good in California while the cost is often higher than diesel.

There is also a possibility that Nikola will raise additional capital this year. It has already been a dilution machine, which has boosted the number of outstanding shares to over 1.3 billion from 29 million in 2020.

Therefore, while Nikola is making progress, it still faces substantial risks about demand and dilution.