Jhe is on his way to Nicholas (NASDAQ: NKLA) as a public company was practically all uphill. When it went public in mid-2020, the company had a vision to transform the trucking industry into battery-powered and hydrogen fuel cell-powered electric tractor-trailers.
In its early days after merging with a Special Purpose Acquisition Company (SPAC), management forecast more than $150 million in revenue for 2021. Instead, in its fourth quarter and annual financial report year 2021, Nikola said that he still did not sell advertising. trucks and reported a net loss of nearly $700 million for the full year. But looking ahead, the company said it has real near-term sales prospects for its battery electric vehicles (BEVs) and sees a lot of progress in hydrogen fuel cell electric vehicles. (FCEV).
A fall on the starting line
Nikola ran into trouble early on when short seller Hindenburg Research published an article in September 2020 that challenged several of Nikola’s claims about its advancements and technologies. This set off a chain of events that culminated in the resignation of founder and executive chairman Trevor Milton, subsequent fraud charges against him, and a crash in the stock price. The stock is down 90% from its 2020 highs.
But the company slowly and steadily continued to work on its plans to increase the use of BEVs and FCEVs for short- and long-haul trucking. Since the beginning of 2022, Nikola has announced letters of intent with several potential customers for at least 250 of its trucks and has ongoing pilot test programs with several partners, including the beverage giant Anheuser-Busch InBev.
2022 should be a breakthrough year
In its recent financial report, Nikola presented a detailed list of what it plans to accomplish in 2022. The headline for investors is that the company plans to deliver between 300 and 500 of its Tre BEVs to its customers. During his conference call with investors, he said it would generate revenue of between $90 million and $150 million. Nikola did say he saw a way to reach his initial revenue projection given to investors a year later than he originally announced.
It bases these expectations on the actual results of ongoing pilot programs with potential future customers. A California port drayage company that intends to purchase 100 Tre BEVs has traveled more than 4,500 miles using two Nikola trucks. It also recorded its longest trip on a single charge of any battery-electric truck it tested at 204 miles. Separately, AB Inbev is using two of Nikola’s hydrogen fuel cell trucks in a three-month pilot project for daily service within the brewer’s Southern California distribution network.
It’s time to check the finances
Nikola also plans to help develop the infrastructure needed for hydrogen vehicles. By the end of this year, the company plans to begin construction of its first hydrogen production center in Arizona and announce at least two partners for hydrogen filling stations in California. That’s part of why he’s projecting capital expenditures of around $300 million for 2022. Nikola ended 2021 with $522 million in cash, however, so he appears to be able to be satisfactorily funded for the moment.
It also has potential catalysts that could bring an edge to company expectations. In January, the California Air Resources Board (CARB) approved the Nikola Tre BEV for an incentive worth $120,000 per truck. And potential customers, even outside of California, could also see Nikola’s trucks with a higher return on investment if oil prices remain at high levels for an extended period.
Of course, ultimately generating revenue does not translate into profitability. But it’s a start, and based on projected sales and recent stock price, Nikola is trading in a 2022 price-to-sales ratio range of around 21 to 35. That’s still not good. market, but it gives investors a metric to watch. It looks like Nikola has finally turned the corner with his business, but the question remains whether the stock will also recover in 2022.
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Howard Smith owns Nikola Corporation. The Motley Fool recommends Anheuser-Busch InBev NV. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.