Nikola stock price forecast: 3 risks that could hurt NKLA

on May 20, 2024
  • Nikola’s shares have plunged below the important support level at $0.5830.
  • The company faces substantial demand risks because of the truck costs.
  • There are also significant dilution risks as its cash balances drop.

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Nikola (NASDAQ: NKLA) stock price continued slumping this month as concerns about its cash flow and overall demand. It has crashed by over 18% in the past 30 days and is hovering at its all-time low. It is down by over 99% from its al–time high.

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Demand risks remain

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Nikola, a leader in the hydrogen trucks industry, has made a lot of progress as I wrote in my last article here. It has moved from R&D to full production and deliveries. In its most recent results, the company said that it had manufactured and sold 75 trucks.

Nikola also noted that it was seeing strong demand from its customers. However, most analysts believe that, for now, the industry will be a niche one because of the elevated costs and risks.

In a recent article, WSJ noted that Ryder Systems, a leading trucking leasing company in the US, said that only a few companies were prepared to pay for electric ones. 

This is notable since electric vehicles are cheaper to buy and maintain than hydrogen fuel cell trucks. For example, the Tesla semi truck starts at about $150k for the 300-mile range and $180k for the 500-mile range.

On the other hand, Nikola’s HYLA trucks cost much more than that, excluding subsidies, meaning that most companies will avoid paying for them. 

At the same time, hydrogen is three times more expensive than diesel, which will push more companies away from the industry. Also,  infrastructure for fuel cell refueling is not as advanced as that of diesel.

Most important, maintenance costs will always be higher than diesel rigs because very few people are experts in the industry. 

A recent report showed that the maintenance cost for a hydrogen truck per kilometer is about €19.6, higher than the €13.24 it takes to maintain battery trucks. Hydrogen trucks have more sophisticated parts than battery electric trucks.

The demand aspect is the most important risk that Nikola faces. The other risk is that the company may need to raise more money later this year as losses mount. 

In its most recent report, the company said that its net loss stood at over $147 million in the first quarter down from $169 million in the same period in 2023. Its cash balance dropped from $464 million in Q1’23 to $345 million, meaning that it will need to replenish its cash soon.

Recent evidence shows that companies continue losing money after starting to sell their vehicles. Firms like Lucid Corp and Rivian have continued losing money in the past few years even though they sell substantial vehicles each quarter.

Nikola stock price forecast

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Nikola stock

NKLA chart by TradingView

The other risk that the NKLA share price faces is from a technical perspective. On the chart above, we see that the stock has crossed the crucial support level at $0.5828, its lowest level in January and April this year. That is a sign that bears are still in control. 

The stock has also formed a head and shoulders pattern, which is a popular bearish sign. It has also remained below the 50-day and 100-day Exponential Moving Averages (EMA). 

Therefore, there is a likelihood that the stock will continue falling in the coming weeks as sellers target the crucial support at $0.40.

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