Nikola (NASDAQ: NKLA) stock price has moved sideways in the past few weeks as investors reflected on last month’s results and the company’s outlook. It has constantly remained below $1 and has retreated by over 16% this year. As a result, it has severely underperformed the broader market as the S&P 500 and Nasdaq 100 indices have surged to record highs.

Nikola Corp has been a troubled company for years. It’s founder is expected to report to prison soon while the company is dealing with an expensive recall. Further, it is in an industry that is facing an uncertain future as most truck buyers opt for diesel-powered trucks.

As a result, Nikola’s investors have lost substantial sums of money over the years as its stock has crashed. The company has also diluted its investors as the number of outstanding shares have jumped to over 1.3 billion. $100,000 invested in the company at its peak is now worth less than $752.

Nikola’s situation may not improve this year as the EV and hydrogen industry is expected to remain under pressure. While its balance sheet has improved modestly, the company may be forced to raise additional capital.

The most recent results showed that the company sold 78 battery electric trucks in 2023 and 35 hydrogen fuel cell trucks. These sales brought in its revenue to $30.1 million. 

However, the company lost substantial sums of money because of its highly-expensive recall. It estimates that the recall costs will be over $65.8 million. In addition to this, the company has also written down about $45.7 million worth of battery pack. 

The company is also spending substantial sums of money to build a hydrogen truck. It estimates that a truck cists about $679k to build. While these costs are expected to come down, they are still too high. 

Keep in mind that the average price of a diesel semi truck ranges between $150k and $220k. These trucks have been used for decades and are known for their durability and efficiency. 

A Nikola truck, on the other hand, is estimated to cost $750k when brand new. Even when California’s HVIP grant is applied, the truck is much more expensive than a diesel one.

Worse, maintaining these trucks is also not cheap since they are new. While California has put in place trucking mandates, I believe that Nikola will struggle to find enough demand at the current prices.

Nikola expects to sell between 300 and 350 trucks this year, generating revenue of between $150 million and $170 million. Its hydrogen and other revenue is expected to come in at between $10M and $12 million. I believe that Nikola is being highly optimistic with these estimates.

Also, I suspect that the company will need to raise additional cash this year. It ended last quarter with unrestricted cash of about $467 million. Considering that it had a loss of $157 million in Q4 and that losses will remain, the possibility of another cash call is still high.

NKLA chart by TradingView

Turning to the daily chart, we see that the NKLA stock price has crashed hard in the past few months. It is now consolidating slightly below $1. As a result, the stock has moved to the 50-day and 25-day Exponential Moving Averages (EMA) while the Average True Range (ATR) has slipped. The ATR is one of the most popular volatility gauges.

Nikola is still one of the top shorted companies in Wall Street. Therefore, while it still has weak fundamentals, a bullish breakout cannot be ruled out. We have seen some of these short-squeezes recently among companies like The RealReal and Mullen Automotive.In an era where useless meme coins like Coq Inu and MAGA are soaring, it is quite risky to be short companies like Nikola.

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