The road for Nikola (NKLA -0.94%) as a public company has been virtually all uphill. When it went public in the middle of 2020, the company had visions of transforming the trucking sector to battery-powered and hydrogen fuel cell-powered electric semis.
Upon its debut after merging with a special purpose acquisition company (SPAC), management projected more than $150 million in revenue for 2021. Instead, in its fourth quarter and full-year 2021 financial report, Nikola said it still hasn't sold any commercial trucks and reported a nearly $700 million net loss for the full year. But looking ahead, the company said it has real prospects for near-term sales of its battery electric vehicles (BEVs) and sees much progress with the hydrogen fuel cell electric vehicle (FCEV) side of the business.
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A crash at the start line
Nikola ran into trouble right out of the gate when short-seller Hindenburg Research released an article in Sept. 2020 that challenged several of Nikola's claims on its progress and technologies. That triggered a chain of events that resulted in the resignation of founder and Executive Chairman Trevor Milton, subsequent fraud charges against him, and a crashing share price. The stock is down a whopping 90% from its highs in 2020.
But the company has slowly and steadily continued to work on its plans to grow the use of BEVs and FCEVs for both short and long haul trucking. Just since the start of 2022, Nikola has announced letters of intent with several potential customers for at least 250 of its trucks and has ongoing pilot testing programs with several partners including beverage giant Anheuser-Busch InBev.
2022 should be a decisive year
In its recent financial report, Nikola presented a detailed list of what it plans to accomplish in 2022. The headline for investors is that the company expects to deliver between 300 and 500 of its Tre BEVs to customers. In its conference call with investors, it said that will generate revenue of between $90 million and $150 million. Nikola effectively said it sees a path to hit its initial revenue projection given to investors one year later than it originally said.
It is basing those expectations on real results from the ongoing pilot programs with potential future customers. One California port drayage company that intends to purchase 100 Tre BEVs has logged over 4,500 miles using two Nikola trucks. It has also recorded its longest trip on a single charge of any battery electric truck it has tested at 204 miles. Separately, AB Inbev is using two of Nikola's hydrogen fuel cell-powered trucks in a three-month pilot for daily service within the brewer's Southern California distribution network.
Time to check financials
Nikola also plans to help develop infrastructure needed for hydrogen-fueled vehicles. By the end of this year, the company expects to start construction of its first hydrogen production hub in Arizona and to announce at least two partners for hydrogen dispensing stations in California. That is partially why it anticipates capital spending of around $300 million for 2022. Nikola ended 2021 with $522 million in cash, however, so it looks to be in position to be satisfactorily funded for now.
It also has potential catalysts that could provide upside to the company's expectations. In January, the California Air Resources Board (CARB) approved the Nikola Tre BEV to qualify for an incentive valued at $120,000 per truck. And potential customers even outside of California could also view Nikola's trucks with a higher return on investment if oil prices remain at high levels for a sustained period.
Of course, finally bringing in revenue does not translate to profitability. But it's a start, and based on the projected sales and the recent share price, Nikola is trading at a 2022 price-to-sales ratio range of between about 21 and 35. That's still not cheap, but it does give investors a metric to watch. It looks like Nikola has finally turned the corner with its business, but the question remains whether the stock also recovers in 2022.
