When electric truck maker Nikola (NKLA 7.23%) hit the public markets four years ago, investors rushed to hitch a ride. After completing its merger with a special purpose acquisition company, Nikola stock started trading at $37.55 in June 2020, and it quickly soared to almost $94 days later as investors recognized a long road of growth ahead for the company.
But the road the company has traveled recently has been packed with potholes, and the stock is down 99% from its all-time high. While it's severely down, it may not be completely out. Let's take a look at what the coming year has in store and if the stock can power higher in the coming months.
Despite the recall, Nikola plans to keep on truckin'
Last summer, things heated up for Nikola -- and not in a good way. After several of its battery electric trucks caught fire due to faulty battery packs, Nikola issued a recall in August. Based on management's commentary during the company's recent fourth quarter 2023 conference call, however, it seems as if the company is past this pothole. In the coming weeks, the company expects to deliver the first battery electric trucks with the new battery packs, and it plans on returning the remainder of the trucks to customers by the end of the second quarter or early in the third quarter. After the recalled trucks have been returned, Nikola plans on retrofitting the battery-electric trucks left in its inventory, which currently number about 150. The company, moreover, expects to recognize revenue for them late in the third quarter or early in the fourth quarter.
In total for 2024, Nikola expects to deliver 400 to 450 trucks, which includes expected sales of 300 to 350 hydrogen fuel cell trucks. If the company achieves the midpoint of its truck delivery guidance, it will represent a 273% increase over the 114 trucks that it delivered in 2023.
Nikola's putting a lot of energy into its energy business
In January 2023, Nikola announced its creation of a new brand dedicated to supporting hydrogen-powered vehicles: Hyla. Under this new brand, Nikola would create an infrastructure for the production, distribution, and dispensing of hydrogen for its hydrogen fuel cell trucks. During the first quarter of 2024, Nikola opened its first Hyla-branded refueling station in Ontario, California. And the company is powering ahead with the development of additional stations in the coming months. Management says it has the potential to advance development of six additional Hyla stations in Southern California and three stations in Northern California by the end of 2024.
Nikola has set a target of developing 60 Hyla hydrogen fueling stations by 2026 to support the fuel needs of its customers.
What's coming down the road regarding the financials
Addressing the year ahead, Steve Girsky, Nikola's CEO, stated that "2024 is about execution, scaling our business, and optimizing revenue and costs." This is certainly evident in the figures that the company provided in its 2024 outlook. For one, Nikola projects revenue from truck sales will total $150 million to $170 million -- a significant increase over the $30.1 million in truck revenue for 2023. With regard to costs, Nikola projects to pare its losses. Whereas the company's gross margin was negative 597% in 2023, it expects to achieve a gross margin of negative 100% to negative 80% in 2024. Further down the income statement, Nikola expects to see additional improvements. The company reported operating expenses of $407 million in 2023; however, in 2024, the company projects operating expenses of $280 million to $300 million.
Does this peek at the future make Nikola a buy?
Clearly, management is optimistic that 2024 is going to be a success. Of course, that's not something upon which investors should solely base an investment. Instead, those who think that steering this electric truck maker into their portfolios is a good idea should tap the brakes, as the stock still seems extremely speculative. It's still unclear whether Nikola will see continued demand for its hydrogen fuel cell trucks and to what degree the company's Hyla business can be a profitable endeavor, if at all.
In light of the numerous risks with a Nikola investment, it seems like most investors would be better off watching this story play out from the side of the road. On the other hand, those keen on a hydrogen investment yet who are reluctant to take on a risky investment like Nikola, may prefer to invest in a hydrogen exchange-traded fund (ETF).
