It’s bad news when a company hits a 52-week low. An all-time low, however, is an order of magnitude worse. That’s just what happened to electric vehicle maker Nikola (NASDAQ:NKLA) as the combined force of a new round of capital raising and an analyst downgrade hit all at once. Investors all but pulled the plug, sending shares down over 12% in Friday afternoon’s trading. It ultimately hit an all-time low of $1.15 per share.
Nikola started its downward slide by announcing a planned share offering that looked to bring in a new $100 million round of capital. Such a move would provide near-term capital. However, that raised eyebrows at BTIG, where analyst Gregory Lewis and team noted that this likely wouldn’t be the last time Nikola went back to the well. Lewis downgraded Nikola from Buy to Hold and has no price target on the stock.
Essentially, Lewis pointed out that Nikola’s burn rate is little short of stupendous. Even with an extra $100 million in the tank, it would still get consumed far too quickly. That’s what led to Lewis’ downgrade. There are signs of hope for Nikola, and even Lewis notes as much. The trucking industry is increasingly going electric; just recently, we heard about Amazon (NASDAQ:AMZN) and its plans to do just that with Rivian (NASDAQ:RIVN) trucks. But Nikola’s incredible cash burn rate will work against it, even as it approaches the ability to bring in $1 million a day with hydrogen incentives.
Still, Wall Street is standing behind Nikola, for the most part, as the stock is rated as a Moderate Buy by analysts’ consensus. With an average price target of $4 per share, Nikola stock also comes with an impressive 227.87% upside potential.