Tuesday, Wolfe Research initiated coverage on Nikola (NASDAQ:NKLA) Corporation (NASDAQ:NKLA) stock, a manufacturer of hydrogen fuel cell and battery electric vehicles, with a Peer Perform rating. The firm's analyst cited Nikola's position as a pioneer in the clean energy sector of the transportation supply chain, which includes various asset-based carriers, logistics companies, and technology providers.
The analyst noted the supportive regulatory environment and subsidies in California for clean energy vehicles. However, they pointed out significant challenges that Nikola may face, particularly in the medium term. The limited charging infrastructure and the high cost of hydrogen were mentioned as potential obstacles to the widespread adoption of fuel cell electric vehicles (FCEVs).
Despite Nikola's innovative approach, Wolfe Research anticipates that the company will continue to face financial hurdles. The report highlighted that Nikola ended the year 2023 with a cash balance of $494 million, while burning through approximately $100 million each quarter. Given these circumstances, the analyst expects Nikola to report EBITDA losses into calendar year 2026 and suggests that another capital raise may be necessary within the next year to sustain operations.
The coverage launch by Wolfe Research reflects a cautious outlook on Nikola's financial health and market challenges, as the company forges ahead in the competitive clean energy vehicle industry.
InvestingPro Insights
In line with the cautious stance of Wolfe Research, InvestingPro data reveals a challenging financial profile for Nikola Corporation (NASDAQ:NKLA). With a market capitalization of $1.35 billion, the company's negative P/E ratios over the last twelve months reflect its lack of profitability. The gross profit margin stands at an alarming -597.3%, underscoring the cost challenges faced by the company.
Nonetheless, on a more positive note, Nikola holds more cash than debt, which is a promising sign for liquidity. Additionally, analysts expect sales growth in the current year, which could signal potential for revenue increases despite the current financial difficulties. However, it's important to note that the stock has experienced significant volatility, with a substantial 50.75% return over the last month, yet a -26.81% return over the last six months.
For investors looking for a deeper dive into Nikola's financials and future prospects, there are additional InvestingPro Tips available. These include insights into cash burn rates, gross profit margins, and stock price volatility. To access these insights and more, visit InvestingPro and use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 14 more InvestingPro Tips to explore, informed investors can better gauge the potential risks and opportunities associated with Nikola Corporation.
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