The days when Nikola (NASDAQ:NKLA) introduced itself to the world by showcasing its hydrogen-powered truck rolling down a hill are now a distant memory. Since that notorious 2018 video, substantial changes have unfolded, particularly regarding the fate of founder Trevor Milton, currently serving a four-year sentence for misleading investors.
Now, having shed its shady past, Wolfe Research analyst Scott Group thinks it’s time to take the company more seriously.
“After years of controversy and management turnover, NKLA finally has a stable management team in place with a well-respected CEO and recently appointed CFO,” the analyst said. “From here, it’s all about execution and commercialization, and NKLA has over 90% share of vouchers (subsidies) in California for FCEVs.”
With deliveries of its fuel cell trucks kicking off in 4Q23, Group anticipates ~400 total truck deliveries this year, edging nearer 1,000+ next year and surpassing 2,000 by 2026. Considering the substantial subsidies in California, Group sees “potential pricing upside” for the company with an average ASP for its FCEVs likely to be higher than $400,000. Given the delivery ramp, Group thinks revenue will climb from $163 million this year, to $442 million in 2025 to more than $800 million in 2026. As Nikola builds out a network of hydrogen fueling stations, this also factors in growth in its Energy business.
“With this revenue ramp, we expect NKLA will see a positive gross margin inflection by C25 and approach EBITDA break-even at some point in C26,” Group further said.
Yet, despite supportive regulations and subsidies in California, Group anticipates that over the medium term the adoption rate of FCEVs will “remain challenged” due to insufficient charging infrastructure and the high cost of hydrogen. And while Group considers Nikola to have a “first mover advantage in commercializing hydrogen fuel cell electric vehicles,” for the next couple of years the analyst sees ongoing EBITDA losses and cash burn. Consequently, Group anticipates that another capital raise will be required within the next year, given that the company saw out 2023 with a total cash balance of $494 million but is currently spending approximately $100 million per quarter.
As such, with a “compelling long-term opportunity but expectations for near- to medium-term losses,” Group initiated coverage of NKLA shares with a Peer Perform (i.e., Neutral) rating without having a fixed price target in mind. (To watch Group’s track record, click here)
Most of Group’s colleagues have a similar take. Based on a mix of 4 Holds and 1 Buy, the analyst consensus rates the stock a Hold. That said, the average price target currently stands at $1.38, implying shares will climb 37% higher over the one-year timeframe. (See NKLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
