Will Nikola Reach a Billion-Dollar Market Cap by 2025?

Nikola (NKLA -1.37%), a producer of electric semi trucks, saw its market cap hit $28.8 billion as its stock hit its record high of $79.73 on June 9, 2020. But at the time of this writing, it trades at about $0.56 a share with a market cap of $750 million.

The stock collapsed after the company missed its own production estimates; its founder and former CEO, Trevor Milton, was convicted of securities and wire fraud; and it recalled nearly all of its trucks following a series of battery fires in 2023. Persistent losses and an ugly balance sheet also made Nikola an easy target for the bears as interest rates rose.

Image source: Nikola.

Nikola still faces a lot of challenges, but could it stabilize and grow into a $1 billion company again by the end of 2025? Let's take a contrarian look at the struggling company and see if it has a shot a joining the three-comma club again.

Nikola's expectations vs. reality

Nikola develops two types of electric semi trucks: battery-powered ones (BEVs) and hydrogen-powered ones (FCEVs). Prior to going public by merging with a special-purpose acquisition company (SPAC) in June 2020, Nikola claimed it could deliver thousands of trucks over the following three years. But this is what actually happened:

Data source: Nikola.

Nikola blamed its sluggish start on supply chain constraints and other macro headwinds, but it had clearly set the bar too high. It also struggled to maintain a consistent strategy under four different CEOs over the past four years.

Meanwhile, financial losses are widening at an alarming rate as Nikola takes on more debt and issues more shares to raise fresh cash. In 2023, it generated just $36 million in revenue but racked up a staggering net loss of $966 million. It still held $378 million in cash and equivalents (including restricted cash) at the end of the first quarter of 2024, but only because it issued new shares at a discount, doubled its existing share count, and issued more debt over the past year.

But don't overlook its potential turnaround

Those ugly numbers make Nikola a tough stock to recommend. In its defense, the business has recovered from its recent recalls and its production rates are stabilizing. It shipped 40 FCEV trucks in the first quarter of 2024, representing a 29% jump from a year earlier.

Nikola's CEO Steve Girsky, who took the helm in August 2023, expects Nikola to generate "$150 million to $170 million" in total truck revenue in 2024. That would exceed the consensus forecast of $123 million and represent 317%-372% growth from 2023. Girsky expects about $10 million to $12 million of 2024 revenue to come from its FCEVs.

Nikola aims to deliver 300-350 trucks this year, and it expects its deliveries to accelerate in 2025 and 2026. During the first-quarter conference call, Girsky predicted that acceleration, along with its tighter spending, would pave the way toward "positive cash generation" with a "positive gross margin."

At the same time, Nikola continues to expand its hydrogen charging network with its partner, Voltera. It plans to open 14 of those stations by the end of 2024 to support its fledgling fleet of FCEVs.

Could Nikola become a billion-dollar company again by 2025?

With a market cap of $750 million, Nikola trades at about 5 times its estimated revenue for 2024. By comparison, Tesla (NASDAQ: TSLA) -- which is emerging as a major competitive threat with its own Tesla Semi -- trades at 6 times this year's sales. But there's a key difference: Tesla has already ramped up its production and is generating consistent profits.

But for 2026, analysts expect Nikola's revenue to roughly triple to $457 million as it scales up its BEV business and delivers more FCEVs. Nikola trades at less than 2 times that estimate, while Tesla trades at 5 times next year's estimated sales.

So if Nikola can successfully scale up its business and match analysts' estimates for 2025 and 2026, it has a clear shot at joining the billion-dollar club again. If it's trading at just 2.5 times its forward sales by the end of 2025, its market cap would reach $1.14 billion -- which would represent a 50% leap from its current price.

However, Nikola still needs to prove that it can ramp up its production, narrow its losses, and widen its competitive moat. In other words, Nikola's stock could still head a lot higher -- but it could plunge even lower if the business disappoints its investors again.