Is Nikola the Next Fisker? | The Motley Fool (2024)

Being at the cutting edge of an industry revolution can come with massive rewards, and also massive risk. That's never been more clear than within the electric vehicle (EV) industry, as Tesla has proven a first-mover advantage can power a company's stock higher for years. At the other end of that spectrum is Fisker, which crumbled under the weight of massive cash burn and consistent production problems.

Fisker won't be the last EV company to close its doors; is Nikola (NKLA -0.78%) the next domino to fall?

The end was near

By February 2024, Fisker investors knew they were in trouble. Fisker had just reported a fourth-quarter net loss of $463 million and slashed 15% of its workforce. A number of problems plagued Fisker vehicles, including delays with suppliers and even difficulty delivering vehicles to paying customers. In fact, while Fisker produced only 10,000 vehicles in 2023 -- less than a quarter of its initial forecast -- it couldn't even deliver half of those vehicles.

Eventually, Fisker would be delisted from the New York Stock Exchange (NYSE), have the U.S. National Highway Traffic Safety Administration (NHTSA) open a preliminary evaluation on Fisker Ocean vehicles, and wouldn't have enough cash to cover its current obligations. No other automaker was willing to send the company a lifeline through partnership or joint ventures or investment, and Fisker was forced to file for bankruptcy.

So how close is fellow EV maker Nikola to this same outcome?

Dire but not dead

Let's start with one troubling similarity between Fisker's last months and Nikola currently. During Nikola's annual meeting on June 5, shareholders approved a proposal allowing Nikola to perform a reverse stock split, with the company opting for a 1-for-30 reverse stock split.

The driving force behind this reverse stock split wasn't bullish, it was for Nikola to remain listed on the Nasdaq Stock Market. Nasdaq requires listed companies to maintain a minimum share price of $1. If a share price falls below that threshold for 30 consecutive trading days, it sends official notice saying the company has 180 calendar days to get back in compliance.

Without good news or strong performance to drive its shares higher, Nikola was left with a grim option to use a reverse stock split to maintain compliance.

Nikola's financials are also deteriorating, and it will almost certainly need to raise capital soon. Like many start-up EV makers, Nikola faces brutal cash burn. Over the past 12 months Nikola posted a negative operating cash flow of nearly $432 million, with only $378 million in cash at the end of the first quarter -- the company has roughly $280 million in debt, to boot.

Nikola's share price has declined 87% over the past year, and declined 50% over the past three months alone. Much of that was driven by the company overpromising and drastically underdelivering. Consider that Nikola originally estimated 3,500 deliveries for battery electric vehicles (BEVs) in 2023 and only managed 79. The story was similar for its fuel cell electric vehicle (FCEV) deliveries, which were estimated to be 2,000 in 2023, while it only delivered 35. Its estimated revenue for 2023 was $1.41 billion, and its actual result was a meager $36 million.

In fairness, Nikola has made progress in 2024, with second-quarter deliveries of hydrogen fuel cell trucks surging 80% compared to the previous three months. However, one quarter doesn't make a trend and investors would be wise to see how deliveries continue during the second half of the year.

Competition ahead

But perhaps the most frightening thing for Nikola investors is the potential competition it faces from Tesla. Tesla initially unveiled its Semi in 2017 with plans to produce the electric Semi truck in 2019, but that was quickly met with massive delays and the first handful of deliveries only began in December 2022. Further, most of the initial production has gone to Tesla's company fleet, and PepsiCo was the only customer to actually take delivery.

So far, Nikola hasn't been impacted by Tesla's Semi, but that's likely to change in the coming years. Last month, Tesla took center stage at the 2024 Advanced Clean Transportation Expo (ACT) in Las Vegas and noted its Semi progress is still on track despite past delays. Tesla appears to remain fully committed to electrifying the trucking industry, and that should frighten Nikola investors thoroughly.

Is Nikola the next Fisker?

To be clear, Nikola is far from the dire position Fisker found itself in. But it's also fair to say that with Nikola's deteriorating financial position, struggles to ramp up production, and consistent failures in meeting targets, it's heading in the wrong direction amid a downturn in EV demand in the U.S. market. If Tesla's Semi is well-received and takes market share, it could leave Nikola in a dire position reminiscent of Fisker.

Investors can hope for an improvement in production and deliveries, but Nikola remains an incredibly speculative investment, and it might get worse before it has a chance to get better.