Nikola Stock Prediction: Should You Invest $1,000?

Key Points：

• Nikola’s massive share sale bewildered the present investors of the company.
• There’s no guarantee that the automaker’s status will improve thanks to Nikola’s newly disclosed strategic relationship.
• It is tough to confidently hold Nikola due to the danger of more downside.

The path Nikola has taken, from moonshot to penny stock, should not give anyone hope that they, too, may become millionaires.

Nikola (NKLA -11.14%) was the electric-truck firm that Wall Street was watching in the summer of 2020, when reverse mergers were all the rage. However, it was a poor decision to hold Nikola stock as failing to sell would have reduced a $2,000 investment to $40.

However, opportunities may arise where others perceive destruction. In 2024, would speculative investors be wise to purchase Nikola stock according to the “buy when there’s blood in the streets” principle?

Considering that the market has likely already factored Nikola’s problems into the stock price, it’s worth thinking about. Nonetheless, Nikola stock is more likely to go down to zero than to make you a hero, especially at fire sale pricing.

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Cash crunch and the founder’s belief

The fourth quarter of 2023 was a rough one for Nikola’s stockholders, even if the main US stock market indices were sailing higher at the time. Anaastasiya Pasterick, chief financial officer, resigned after only six months on the job. Also, from $236 million in the same period last year to $426 million in Q3 2023, Nikola’s net loss widened substantially.

In the third quarter, Nikola stock dropped below the $1 mark, a psychologically important landmark. Maybe investors weren’t as excited about hype-driven, loss-making ventures as they were in 2020 and 2021.

Unfortunately, Nikola’s financial situation is less than ideal, which further dampens optimism. Nikola is allegedly expected by Wall Street to require over $500 million in cash to finance its operations over the following four quarters, despite the fact that the automaker completed Q3 with $363 million in cash and cash equivalents.

The focus of attention has not been on Nikola’s limited and narrow cash runway. The most interesting part of the narrative is what happened to Nikola founder Trevor Milton. He was found guilty of deceiving the company’s investors and was sentenced to four years in prison.

It’s understandable that Milton’s statement would garner attention, but he is no longer associated with the organization. It’s true that Milton tarnished Nikola’s reputation, but careful investors would be better served by paying more attention to the company’s financial predicament and less to Milton’s tragic destiny.

Collaborative effort, large-scale sharing sale

Investors in Nikola should be able to see beyond the Milton quagmire thanks to two pieces of recent news. To start, the business was very delighted to announce its ten-year strategic alliance with FirstElement Fuel, a developer of solutions for hydrogen filling stations.

Despite the length of time that this partnership has been going, its practical effect has been somewhat small. One truck stop in Oakland, California, will be designated by FirstElement Fuel to fill up Nikola drivers’ vehicles. There may be room for growth in this agreement, but for Nikola and its shareholders, it doesn’t appear to be changing the game just yet.

Last but not least, Nikola’s recent debt-issuance revelation has consequences. In particular, Nikola intends to offer $200 million in bonds, or “green convertible senior notes,” and $100 million in ordinary stock.

Nikola has issued debt before, and Wall Street was understandably unimpressed by the idea of printing and selling shares. Nikola stock dropped 23% the following day, likely due to concerns over share-value dilution.

Similar to how investors lost trust in Nikola’s creator, the company itself may face a similar fate. What is to prevent Nikola from continuing down the path of dilutive capital-raising in the future, now that he has unabashedly done so?

Nikola stock doesn’t appear to be a sure bet for cautious investors given the company’s decision to use debt issuance as a short-term solution to its poor financial situation.

Should You Invest $1,000 in Nikola Stock?

Take this into account before investing in Nikola:

Among the ten stocks that the BTCC research team has lately recommended to investors, Nikola did not make the cut. The ten equities chosen have the potential to generate enormous profits in the years to come.

If you had invested $1,000 when we recommended it (April 15, 2005), you would have $295,114!* (Nvidia made this list at that time).