January 26, 2023

Auto share Nikola (NKLA) beat its Q3 2022 revenue estimates. However, it missed EPS estimates. In addition, NKLA lowered its 2022 outlook amid a marked downtrend in demand. The stock has lost more than 75% in 2022 and is trading near its 52-week low of $2.27. So NKLA is now best avoided or sold short. Keep reading….

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Nikola Corporation (NKLA) beat its revenue estimates by 10.1% for the third quarter of 2022. Revenue came in at $24.24 million. However, it missed EPS estimates by 9.2%. Earnings per share were $0.54 negative.

Recently NKLA and ChargePoint Holdings, Inc. (CHPT), a leading electric vehicle (EV) charging network, announced their partnership to accelerate the deployment of EV charging infrastructure for fleets in the US

However, amid falling demand, NKLA lowered its outlook for 2022. It planned to build between 300 and 500 trucks by the end of 2022, but reduced this to 255 and 305 trucks. In addition, the company laid off 7% of its employeesciting widespread macro headwinds.

NKLA lost 16.9% over the past month to close out the last trading session at $2.46. It lost 75.1% year-to-date and 62.1% in the past six months.

Here’s what could determine NKLA’s performance in the near term:

Weak balance

NKLAs cash and cash equivalents was $315.73 million for the period ended September 30, 2022, compared to $497.24 million for the period ended December 31, 2021. Total current assets were $486.92 million, compared to $524.73 million for the same period.

Also, long-term debt was $283.26 million compared to $25.05 million while total liabilities were $595.40 million compared to $296.25 million.

Unfavorable EPS estimates

Analysts expect NKLA’s earnings per share to decline 87% year over year to negative $0.43 for the quarter ending December 2022 and 76.2% year over year to negative $0.37 for the quarter ending December 2022. the quarter ending March 2023. In addition, earnings per share are expected to decline 44.3% yoy to negative $1.14 in 2022 and 18.4% yoy to negative $1.35 in 2023.

Bad profitability

NKLA’s 12-month gross profit margin of -133.29% is lower than the industry average of 29.09%. In addition, the 12-month ROCE, ROTC and ROTA of negative 113.47%, 55.93% and 62.24% are compared to the industry averages of 14.16%, 6.81% and 5.35% respectively.

POWR ratings reflect bleak outlook

NKLA has an overall rating of F, which equates to strong sales in our property POWR ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor optimally weighted.

Our proprietary rating system also evaluates each stock based on eight different categories. NKLA has an F grade for quality, consistent with its negative profitability margins.

It has a D grade for value. The 16.77x EV/Sales forward is 903.9% higher than the 1.67x industry average, and the 15.66x Price/Sales forward is significantly higher than the 1.26x industry average.

In the 62 stock Car and vehicle manufacturers industry, NKLA ranks last. The industry is rated D.

Click here for the additional POWR ratings for NKLA (Growth, Momentum, Stability, Sentiment).

View all the top stocks in the auto and vehicle manufacturing industry here.

It boils down

NKLA’s growth prospects look bleak. In addition, it is trading near the 52-week low of $2.27, which it reached on Nov. 22, 2022. Given the stock’s bleak fundamentals, NKLA is now best avoided or sold short.

How does Nikola Corporation (NKLA) compare to its peers?

While NKLA has an overall POWR rating of F, one might consider looking at industry peers, Isuzu Motors Limited (ISUZY), Suzuki Motor Corporation (SZKMY) and Subaru Corporation (FUJHY), which have an overall A rating (Strong Buy).

NKLA shares rose $0.03 (+1.22%) during premarket trading on Wednesday. Year-to-date, NKLA is down -74.87%, versus a -16.28% increase in the benchmark S&P 500 index over the same period.

About the author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentary.


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