Nikola stock rises as CEO, Stephen Girsky buys the dip: should you?

Nikola (NASDAQ: NKLA) stock price rose slightly on Tuesday and Wednesday as the company’s CEO bought the dip. It rose by over 2% on Tuesday and is up by over 3% in the pre-market session. Still, it remains almost 100% below its all-time high.

Stephen Girsky buys Nikola stock dip

Financial disclosures released this week showed that Stephen Girsky is putting his money where the mouth is. He announced that he acquired 1 million shares worth over $450 million. This purchase brought his total outstanding shares to over 7.2 million ($3.9 million).

It was the first time an insider bought Nikola stock in a long time. 5 insiders have sold shares in the past 12 months. Also, all insiders own just 0.74% of the company, a tiny figure compared to other companies.

Girsky’s purchase came at a time when the company is ramping up production of its hydrogen trucks. By the end of the last quarter, it had manufactured and delivered 75 trucks to customers in the United States.

The company is facing substantial risks going forward. It is still losing millions of dollars as it continues to manufacture. The most recent results showed that its total net loss narrowed to $147 million.

Nikola will therefore need to raise additional capital if the loss-making trend continues. It ended the last quarter with $345 million in cash and equivalents, down from $464 million in the fourth quarter of 2023.

Nikola stock chart

Fuel cell technology is risky

The other challenge is that demand for hydrogen trucks will remain soft for a while. These trucks are more expensive than diesel ones, with a HYLA truck is over $350k. Nikola spends over $679k to manufacture, which is unsustainable.

The cost to buy these trucks is even more expensive than traditional ones even when state and federal subsidies are applied. Also, it costs three times to fuel a hydrogen truck compared to a diesel truck in the US.

Most importantly, repair and maintenance of Zero Emission Fuel Cell (ZEFC) is more expensive than diesel trucks because the number of technicians is a bit small. Therefore, analysts believe that Nikola faces more headwinds than tailwinds.

Stephen Girsky’s purchase is likely because he expects the company’s revenue growth will continue. Analysts expect that the firm’s revenue will jump to $121 million this year followed by $421 million in 2025.

So, is it safe to buy the Nikola stock dip? I believe that Nikola is a high-risk and high-reward company. The biggest risk is where the company implodes and goes bankrupt. The alternative is where it emerges as a leading player in a fast-growing industry and continually gains market share.