Nikola's (NKLA -4.98%) stock rose 4% on July 5 after the electric truck maker posted its production and delivery numbers for the second quarter of 2023. It produced 33 new Tre Battery Electric Vehicles (BEVs) and completed 111 deliveries -- including 45 BEVs for wholesale customers and 66 BEVs for retail customers.
For the first half of the year, Nikola produced 96 BEVs and completed 175 deliveries -- consisting of 76 wholesale BEVs and 99 retail BEVs. That already surpasses the 131 BEVs it delivered in 2022, and suggests it can accomplish its goal of delivering 250 to 300 BEVs in 2023. It also plans to launch its hydrogen fuel cell electric vehicle (FCEV) in the third quarter.
Do those improving production rates suggest Nikola's stock can finally recover after plummeting 70% over the past 12 months?
Image source: Nikola.
Overcoming broken promises and a brand-tarnishing scandal
Nikola went public by merging with a special purpose acquisition company (SPAC) run by former General Motors Vice-Chairman Steve Girsky in June 2020. At the time, it said it could deliver 600 BEVs in 2021 and 1,200 BEVs in 2022. But like many other SPAC-backed EV makers, Nikola overpromised and underdelivered.
In fact, Nikola missed its own estimates so broadly that its founder and former CEO Trevor Milton -- who had been accused of inflating those forecasts to boost its stock price -- was convicted of securities and wire fraud last October. Those setbacks caused the bulls to abandon Nikola, while rising interest rates popped its bubbly valuations and cast a harsh light on its persistent losses and dwindling liquidity.
Nikola's new CEO, Michael Lohscheller, has been trying to distance the company from that messy history -- but it could be tough to convince investors that it's finally turned over a new leaf.
Reviewing Nikola's key numbers
For 2023, investors should see if Nikola can deliver 250 to 300 BEVs, launch its first hydrogen FCEVs, and start building its network of hydrogen charging stations.
During its SPAC presentation, Nikola claimed it could open 10 hydrogen charging stations in 2023. It hasn't opened a single one so far, but it recently received a $41.9 million grant from the California Transportation Commission to build six hydrogen stations across Southern California. Those stations will be operated under the HYLA brand with its partner Voltera and could open by the end of this year.
Nikola expects to open 50 hydrogen stations with Voltera by the end of 2028.
If Nikola can achieve those goals, it has a shot at meeting analysts' expectations by nearly tripling its revenue to $148 million this year. But on the bottom line, analysts only expect it to slightly narrow its net loss from $784 million in 2022 to $656 million in 2023. That outlook is worrisome since Nikola ended the first quarter of 2023 with only $121 million in unrestricted cash and equivalents compared to $233 million at the end of 2022.
But Nikola also made some drastic moves to shore up its liquidity in Q2. It sold $100 million of its shares at a steep discount to its trading price. It liquidated Romeo Power (the battery pack maker it bought less than a year ago), sold its stake in its European joint venture with Iveco for $35 million, and laid off 270 employees (roughly 23% of its workforce) to reduce its personnel-related cash spend by $50 million annually.
We can't gauge the effect of all those moves on its balance sheet until Nikola reports its full Q2 earnings report on Aug. 4, but its liquidity could certainly improve sequentially. If that happens, we might just see a short squeeze since 16% of Nikola's outstanding shares were still being shorted as of June 16.
Investors should also note that its debt-to-equity ratio of 1.1 isn't ideal, but it still gives it room to raise fresh cash if its coffers run dry. Therefore, Nikola might not be in great financial shape, but it's far too early to claim it will go bankrupt.
Is Nikola's stock worth buying right now?
Nikola established an early mover's advantage in the electric and hydrogen-powered semi truck market, and it's ramping up its production and overcoming its past mistakes. But with an enterprise value of $1.64 billion, Nikola still isn't cheap at 11 times this year's sales. By comparison, Tesla -- which started to deliver its first electric semi trucks last December -- trades at just eight times this year's sales. Tesla is also firmly profitable and trades at 75 times forward earnings.
Nikola's progress under Michael Lohscheller is encouraging, but it isn't out of the woods and its stock isn't a bargain. Therefore, I'm not tossing Nikola in the same heap of failing SPAC-backed EV makers like Canoo or Faraday Future, but I definitely wouldn't bet on its long-term turnaround yet.
