Nikola's (NASDAQ: NKLA) stock has plunged nearly 99% over the past three years. The maker of electric semi-trucks was a red-hot stock during the buying frenzy in speculative stocks in 2020, but it ran out of juice after it missed its production forecasts.
After that steep decline, Nikola's stock now trades at just 2 times this year's sales. Could this beaten-down EV stock unexpectedly roar back to life over the next three years?
Image source: Nikola.
What happened to Nikola over the past three years?
Like many other electric vehicle start-ups, Nikola went public by merging with a special purpose acquisition company (SPAC) and set some overly ambitious long-term goals. In its pre-merger presentation in 2020, it claimed it could ship 600 battery-powered electric trucks (BEVs) in 2021, ship 1,200 BEVs in 2022, and ship 3,500 BEVs in 2023. It also planned to deliver 2,000 hydrogen-powered fuel cell electric trucks (FCEVs) in 2023.
But in reality, Nikola didn't ship a single BEV in 2021. It only shipped 131 BEVs in 2022 and 79 BEVs in 2023 before a series of battery fires forced it to recall most of those vehicles. It only delivered 35 FCEVs in 2023. That's why the company barely generated any revenue as it racked up catastrophic losses over the past three years.
Metric | 2021 | 2022 | 2023 |
|---|---|---|---|
Revenue | $0 | $50.8 million | $35.8 million |
Net loss | ($690.4 million) | ($784.2 million) | ($966.3 million) |
Data source: Nikola.
Nikola has also been led by three different CEOs since its public debut, and its founder Trevor Milton was convicted of securities and wire fraud in 2022. As it racked up steeper losses, it desperately increased its number of outstanding shares by 278% over the past three years to raise fresh cash through stock sales and secondary offerings.
As Nikola struggled to stay solvent, its larger competitor Daimler Truck ramped up its deliveries of its Freightliner eCascadia electric semi truck for dozens of big corporate customers like UPS, Walmart, and Sysco. Tesla also unveiled its first Semi model in late 2022, and it plans to start mass-producing that eagerly anticipated vehicle in 2025. This intense competition could crush Nikola before it ever scales up its business.
So what will happen to Nikola over the next three years?
Nikola is trying to differentiate itself from those competitors by selling more hydrogen-powered FCEVs. FCEVs can be charged more quickly than BEVs and have a much longer driving range, but they require more capital-intensive hydrogen charging stations to be built. Nikola has been working with the hydrogen company Voltera to build a network of 60 hydrogen charging stations across the U.S. by 2026, but that's a costly effort that will exacerbate its near-term losses.
Nikola expects to keep selling more FCEVs as it strives to conclude its BEV recall by the end of 2024. After it finishes that recall, it plans to roll out the "2.0" version of its BEVs to keep up with Daimler Truck and Tesla in the electric semi market.
That plan seems to be working. Its deliveries rose 49% year over year to 113 trucks (all FCEVs) in the first half of 2024, and its revenue grew 49% to $38.8 million. Analysts expect its revenue to nearly quadruple to $133.5 million for the full year.
Nikola remains deeply unprofitable, but its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved year over year from negative 879% to negative 550% in the first half of 2024 as it tightened up its spending. For the full year, analysts expect it to post a negative adjusted EBITDA margin of 291%.
Assuming Nikola can scale up its business, analysts expect its revenue to roughly triple to $406.5 million in 2025 and more than double to $934.2 million in 2026. By the final year, they expect its adjusted EBITDA margin to improve to negative 17%. If it still trades at 2 times sales by then, its market cap could grow nearly sevenfold to $1.8 billion.
But it could still be tough for Nikola to ramp up its production without running out of cash. It had $256.3 million in cash and equivalents at the end of its latest quarter, but it was still shouldering $586.4 million in total liabilities. Analysts also expect it to rack up a steep net loss of $493 million for the full year. Therefore, Nikola could need to take on a lot more debt and keep diluting its shares to stay solvent.
Where will Nikola's stock be in three years?
Nikola's stock might soar if it gets its act together. But it also faces formidable competitors and could struggle to scale up its business. Its jarring strategic shifts under three different CEOs make it tough to put any faith in its long-term growth strategies, and its insiders notably didn't buy a single share of its battered stock over the past 12 months. So for now, I think Nikola's stock will stagnate over the next three years unless many more green shoots appear.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Walmart. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
