Nikola's (NASDAQ: NKLA) stock jumped 8% on Aug. 9 after the maker of electric semi trucks reported second-quarter results. Revenue surged 104% year over year to $31.3 million and exceeded analysts' estimates by $5.1 million.
It narrowed its adjusted net loss from $139.3 million to $124.5 million, or $2.67 per share, which also cleared the consensus forecast by $0.06. Those headline numbers suggest Nikola's business is stabilizing, but its stock remains more than 99% below its all-time high from four years ago. So, is it the right time to buy, sell, or hold this volatile EV stock?
Image source: Nikola.
Is Nikola finally ramping up its production?
Nikola produces battery-powered electric semi trucks (BEVs) and hydrogen fuel cell electric semi trucks (FCEVs). When it went public by merging with a special purpose acquisition company in 2020, it boldly predicted it would deliver 600 BEVs in 2021, 1,200 BEVs in 2022, and 3,500 BEVs in 2023. It also claimed it would start mass-producing its FCEVs in 2023 and deliver 2,000 of those vehicles for the full year.
But Nikola didn't deliver a single BEV in 2021. It finally delivered 131 in 2022 and only 79 in 2023 as it temporarily halted its sales and recalled its trucks after several battery fires. It delivered 35 FCEVs in 2023.
Nikola has been led by three different CEOs since its public debut, and its founder Trevor Milton was convicted of securities and wire fraud in 2022. It also has increased its number of outstanding shares by more than 250% over the past four years as it desperately tried to raise fresh cash through secondary offerings.
stabilize its cash flow. In the first half of 2024, the company ramped up its production and deliveries, grew its revenue, and improved its adjusted EBITDA margin as it streamlined its spending and lapped its shutdown of its in-house battery pack supplier Romeo Power last July. Those improvements stabilized its liquidity and slightly reduced its total leverage.
Metric | First Half 2023 | First Half 2024 | Change (YOY) |
|---|---|---|---|
Trucks produced | 96 | 120 | 25% |
Trucks shipped | 76 | 113 | 49% |
Total revenue | $26.04 million | $38.82 million | 49% |
Gross margin | (193%) | (289%) | (96 percentage points) |
Adjusted EBITDA margin | (879%) | (550%) | 329 percentage points |
Cash and equivalents | $226.67 million | $256.33 million | 13% |
Total liabilities | $614.79 million | $586.36 million | (5%) |
Data source: Nikola. YOY = year over year.
FCEVs accounted for most of the trucks Nikola sold in the first half of 2024. Those sales are offsetting its stagnant sales of BEVs, which are still being remedied for its customers in the aftermath of its battery-related recall. It expects to conclude that recall by the end of 2024 as it rolls out the 2.0 version of its BEVs.
Nikola's debt-to-equity ratio of 1.1 seems manageable, but that's mainly because it more than doubled its number of weighted-average shares year over year in the first half of 2024 to raise more capital through stock sales. In other words, it's severely diluting its existing shares to prevent its balance sheet from collapsing.
Is it the right time to buy, sell, or hold Nikola?
For the full year, analysts expect Nikola's revenue to soar 252% to $126 million as it ships more FCEVs and stabilizes its BEV business. Based on its current enterprise value of $406 million, the stock looks cheap at just 3 times this year's sales.
Tesla, which rolled out its own battery-powered semi in 2022, is growing at a slower rate but trades at 6 times this year's sales. However, Nikola's ongoing dilution could boost its valuations, even if its stock price doesn't rise.
Analysts also expect Nikola to narrow its adjusted EBITDA loss from $519 million in 2023 to $372 million in 2024. That would represent the first time the company narrowed its adjusted EBITDA loss year over year since its public debut, but it might not convince the bears that its business is sustainable -- especially if Tesla aggressively scales up its semi truck business to drive smaller competitors like Nikola out of the market.
It doesn't make much sense to sell Nikola at these low valuations. But it's also extremely risky to buy the stock before it successfully completes its BEV recall and scales up its FCEV business. So for now, I think the best idea is to hold Nikola if you already own it -- and wait for it to make more progress before buying any more shares.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
