Nikola Shares Fall Even As EV Maker Beats Q3 Expectations

Key Points

• Nikola reported its third quarter before the opening bell, saying its loss was narrower than Wall Street anticipated, while revenue came in higher than expected. 
• The Phoenix-based company reported an adjusted per-share loss of $0.28, better than Wall Street’s forecast of $0.38 per share. Revenue was $24.2 million, higher than the consensus estimate of $22.7 million. 
• The company announced several positive developments that occurred during the quarter, giving hope for future growth.

The company has no earnings and its former CEO was just convicted of fraud, but electric vehicle maker Nikola NASDAQ: NKLA had some good news Thursday.

Nikola reported its third quarter before the opening bell, saying its loss was narrower than Wall Street anticipated, while revenue came in higher than expected. 

The Phoenix-based company reported an adjusted per-share loss of $0.28, better than Wall Street’s forecast of $0.38 per share. Revenue was $24.2 million, higher than the consensus estimate of $22.7 million. 

The stock has generated interest among retail investors who are optimistic about the future of the EV industry, but the stock, along with penny-stock EV maker Mullen Automotive NASDAQ: MULN remains speculative. 

For example, even better-than-expected news couldn’t buoy Nikola’s stock as the broader market declined Thursday. When investors have conviction in a company, a strong earnings report can provide a boost, even as major indexes tumble. 

You could see that happening Thursday with Albemarle NYSE: ALB. The lithium miner reported quarterly results late Wednesday, topping Wall Street estimates and lifting its full-year forecast. The company cited the strong demand for EVs as a factor in its growth.

While EV demand is soaring, it’s due to more established manufacturers such as Tesla NASDAQ: TSLA and China’s BYD OTCMKTS: BYDDF. That doesn’t mean Nikola can’t eventually become a major industry player, or reward shareholders via an acquisition by a larger company.

In fact, there were several highlights from  Nikola’s earnings release, which indicated that the company is headed in the right direction. Those included:

• Produced 75 Nikola Tre battery electric vehicles in Coolidge, Arizona, and delivered 63 to dealers.
• Completed purchase of land in Buckeye, AZ for hydrogen production hub.
• Signed term sheet for collaboration with E.ON in Europe to establish a hydrogen supply and related infrastructure to meet the demands of customers in Europe and from the broader heavy-duty truck market.
• Announced in November the execution of a purchase order for 100 Nikola Tre BEVs by Zeem Solutions. Zeem is focused on bundling electric vehicles, charging solutions, maintenance, and other services for a flat fee. This allows vehicle fleets to deploy EVs without waiting for delivery and infrastructure build-out. Zeem's purchase order for the 100 Nikola Tre BEVs will help meet Zeem's current customer demand.
• Unveiled the European Tre BEV and Tre FCEV at IAA in Hanover, Germany in September.
• Raised $100.5 million in gross proceeds through an at-the-market offering. 
• Completed the acquisition of Romeo Power in October. Romeo is a provider of custom electrification solutions for the commercial vehicle industry.

While the company grabbed headlines due to former CEO Trevor Milton’s recent conviction for defrauding investors, Milton’s involvement with the company is old news. The highlights from the earnings release, and the company’s ambitious plans for not only vehicles, but for charging stations and infrastructure, are more relevant for investors today. 

There’s not much positive to say about Nikola’s chart, other than perhaps the observation that shares are trading above the 21-day moving average. It’s been below its 50-day line since late August, and is not forming any kind of consolidation; instead, it’s just meandering lower.

The stock attempted rallies in the past four sessions, but can’t muster up the strength to pass short-term resistance above $3.97. 

A low-priced stock like Nikola, or Mullen, for that matter, is not on the radar of big institutions whose buying sends the price soaring. 

It’s true that there’s room for optimism about both, particularly Nikola. But it’s a different thing to purchase stock as a speculative investment, or even a quick trade, versus parking money in a downward-trending security. In the latter case, you’re likely to incur an opportunity cost, as other investments trend higher, while a below-institutional-quality stock languishes.