Nikola (NKLA) stock price went parabolic on Wednesday after the hydrogen truck company published a strong production and sales report. It soared by over 20% in its best day in over a month, reaching a high of $5.90, its highest level since September 26.
Disrupting the trucking industry
The trucking industry is a giant one, and analysts expect it to continue growing in the coming years as central banks slash interest rates, which will lead to more consumer spending.
Estimates are that the industry was valued at over $141 billion last year, and was growing at over 5% each year. Data also shows that over 507,200 trucks were sold in the United States in 2023.
Most of these trucks were fueled by diesel because the industry’s uptake of electric semi trucks was low. A good example of this is Tesla, which launched, and started delivering its electric truck two years ago.
Tesla does not report the specifics about the number of trucks it has sold. However, analysts believe that it has sold less than 150 trucks since then. Most of these semi trucks were sold to Pepsi, while Tesla owns the rest.
Therefore, Nikola, a startup with a good record of burning cash, is working to disrupt the trucking industry by building hydrogen trucks. In a report on Thursday, the company said that it sold 88 hydrogen trucks in the third quarter, an increase from the 72 trucks it wholesaled in the second quarter, a sign that its manufacturing process was working.
Nikola has now sold 200 hydrogen trucks in the first three quarters of the year, and the company expects to continue ramping up production in the coming quarters. In a statement, its CEO, Steve Gorski, said:
“Despite overall market headwinds, Nikola remains focused on our mission to pioneer solutions for a zero-emission world, and we’re doing it one truck at a time.”
Nikola’s revenue is growing while losses are
The most recent financial results revealed that its business was doing well, despite its loss-making trend.
Its revenue rose to over $31 million, a big increase from the $15 million it made last year. This revenue growth was driven by the company’s truck production and sales. It produced 77 trucks and shipped 77.
At the same time, the company’s net loss narrowed to $133 million from the previous $217 million. Its loss per share improved from $5.90 to $2.67. These are encouraging numbers since they show that Nikola was doing what it promised.
The challenge, however, is that its balance sheet is not all that strong, meaning that investors will likely need to provide more cash either later this year or in 2025. As we have seen with other companies like Rivian and Lucid, it takes more time for them to become profitable.
Nikola ended the last quarter with $256 million in cash and cash equivalents and $10.2 million in restricted cash. While these are substantial sums of money, they are not enough for a company that is still burning money.
It had an adjusted free cash outflow of $148 million in the second quarter and $140 million and $280 million in the first half. This means that it will likely continue generating negative cash flows in the foreseeable future.
Nikola investors have suffered substantially as the company has increased the number of outstanding shares. It ended the last quarter with a weighted average outstanding share of 47 million, up from 23.6 million in the same period last year. Its share count stood at less than 1 million in 2020, meaning that shares have risen by 4,700%.
The other challenge for Nikola is whether there is a strong demand for its trucks because of the prohibitive costs and weak hydrogen infrastructure.
Nikola stock price analysis
NKLA chart by TradingView
Nikola shares have crashed hard in the past few years as its cash burning trend has continued. It has dropped by over 80% in the last 12 months, making it one of the worst-performing companies in Wall Street.
As a result, Nikola has remained below all moving average, meaning that short sellers have been in control.
However, as I wrote in August, the stock has formed a falling wedge pattern, a popular bullish sign. Therefore, with interest rates starting to come down, there is a likelihood that the stock will bounce back. If this happens, it will bounce back to the key resistance point at $9.75, its highest swing in August.
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