Nikola's stock drops as revenue fell to less than half what was expected

By Tomi Kilgore

Baird's Ben Kallo says Nikola's shift to prioritize volumes is bullish, and his $2 stock price target implies a more than tripling from current levels

Shares of Nikola Corp. dropped in premarket trading Tuesday, reversing a brief gain, after the electric-truck maker reported first-quarter revenue that fell to less than half what was expected, offsetting a narrower-than-expected loss.

"We continue to move forward rapidly and execute our plans," said Chief Executive Steve Girsky. "And please keep that in mind - we are in the execution phase, not the planning or concepting phase."

The stock (NKLA) rose as much as 4.7% in the first minutes after Nikola's report was released, but quickly reversed course. It was down 4.7% in recent afternoon trading, to put it on track for the lowest close since June 7, 2023.

Net losses narrowed to $147.7 million, or 11 cents a share, from $169.1 million, or 31 cents a share, in the same period a year ago. Excluding nonrecurring items, such as stock-based compensation and losses on equipment purchase cancellations, the adjusted per-share loss of 9 cents beat the FactSet loss consensus of 10 cents.

Revenue fell 25.4% to $7.50 million, while the FactSet consensus was for an increase of 47.8% to $15.78 million.

The number of trucks produced dropped 32% to 43 while the number of trucks shipped increased 29% to 40.

Cost of revenue jumped 95% to $65.07 million, as gross margin worsened to negative 768% from negative 213%.

The company said that at the end of the first quarter, it exceeded its guidance by delivering 40 fuel-cell electric vehicles, to bring the number of wholesaled FCEVs to 75 in the first two quarters of production.

"We're seeing green shoots with repeat and new fleets, some in new markets such as N.Y.," the company said. "While our initial focus has been Calif. and Canada, we can expand our reach to meet the demands of end fleet users virtually anywhere in the U.S."

Baird analyst Ben Kallo reiterated his outperform rating on Nikola's stock, citing the company's shift in strategy to prioritize large, national fleets in order to grow volumes and benefit from manufacturing at scale. He also kept his stock price target at $2, which implies 239% upside from current levels.

"We believe the decision to prioritize volumes is a positive for the long-term setup, but are cautious in the near-term due to the lack of visibility into cost improvements and liquidity risk," Kallo wrote in a note to clients.

The stock has tumbled 32% year to date, while the Global X Autonomous and Electric Vehicles ETF DRIV has slipped 2% and the S&P 500 index has gained 8.7%.

-Tomi Kilgore

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05-07-24 1507ET

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