Nikola stock price sits at a pivotal level as risks remain

Nikola (NASDAQ: NKLA) stock price has been stuck at a crucial support level as investors digest the recent financial results. It was trading at $0.567 on Thursday, an important level since it was its lowest level in June last year. It has plummeted by over 36% this year and by over 99% from its highest point on record.

Growth at a significant cost

Nikola Corporation has done well in the past few years as it worked to develop its hydrogen trucks. It started manufacturing its HYLA truck in the fourth quarter and is already delivering them to customers.

The company sold 40 trucks in the fourth-quarter, bringing the total units sold to 75. Its quarterly delivery figure was higher than expected and the management believes that it will sell between 300 and 350 trucks this year.

At the upper side of its guidance, the HYLA truck is expected to bring in about $133 million in revenues this year. Analysts expect that the firm’s revenue will come in at over $140 million this year, a big increase for a company that made $35 million in 2023. Its revenue is expected to be $428 million in 2025.

Therefore, at face value, the company is doing well, helped by subsidies by the federal government and California state.

However, there are several concerns, which explains why the stock has tumbled sharply. First, its growth is coming at a cost and ramping up will likely be expensive. Nikola’s revenue in the first quarter was over $7.4 million while its net loss was over $147 million.

The loss-making trend will likely continue even though it has completed handling with BEV recall. However, as we have seen with other companies like Lucid and Rivian, it takes a long period for an EV company to start turning a profit.

The challenge for Nikola is that it will likely need to raise additional funds since it ended the last quarter with over $345 million in cash and equivalents. It also has $1.2 million in restricted cash. While these are huge sums, there is a possibility that it will raise cash later this year.

The other challenge for Nikola is that the cost of hydrogen fueling is still high while logistical issues are huge. 

In a report earlier this year, S&P said California’s hydrogen fueling network had significant reliability issues. It also noted that hydrogen fuel was three times higher than diesel. The same is true with hydrogen trucks themselves. Therefore, adoption of these trucks may take time.

Nikola stock price forecast

NKLA chart by TradingView

NKLA shares have been in a strong bearish trend this year as concerns about its profits and balance sheet remained. It is now sitting at the crucial support at $0.5828, its lowest point on March 14th and January 18th. Also, the stock is hovering slightly above $0.5333 (June 2023 low).

Nikola has moved below the 50-day and 25-day Exponential Moving Averages, which formed a crossover recently.

There are signs that it has formed a head and shoulders chart pattern, pointing to more downside. If this happens, it will drop to the next psychological level at $0.40. However, shorting the stock is risky since it could go through a major short squeeze.