It’s not difficult to find worrisome news about electric vehicle (EV) manufacturer Nikola (NASDAQ:NKLA). The real challenge would be to identify reasons to buy NKLA stock. Yet, it’s actually possible to build a bull case — and if you have a strong tolerance for risk, you might even end up investing in Nikola today.
Suffice it to say, anyone who bought and held Nikola stock for the long term is struggling right now. Once a promising EV startup, Nikola has seemingly devolved into a target of critics and short-sellers.
Nevertheless, Nikola is still in business, and the company’s story isn’t finished yet. Ultimately, Nikola and its stakeholders might prevail in the end, proving the skeptics wrong despite the company’s formidable challenges.
Bad News About NKLA Stock Is Already Known and Priced In
Are you a contrarian who believes in the efficiency of financial markets? If so, then Nikola stock may be worth considering. After all, investors tend to bake all known information — including all of the bad news — into stock prices very quickly.
So, what’s the bad news surrounding Nikola? First of all, the automaker reported revenue of $11.1 million for 2023’s first quarter, missing Wall Street’s call for $12.9 million. On the other hand, Nikola announced a quarterly net earnings loss of 26 cents per share, which was in line with the analyst consensus estimate.
Still, the revenue miss undoubtedly disappointed some investors. Also, the Nasdaq exchange notified Nikola that, since NKLA stock traded below the exchange’s minimum bid price of $1 for 30 consecutive days, Nikola is at risk of being delisted from the Nasdaq exchange. However, Nikola assured, “The Nasdaq Notification Letter does not impact Nikola’s listing on Nasdaq at this time.”
In order to raise its stock price above $1, Nikola might end up enacting a reverse share split at some point. That remains to be seen, though. In any case, due to these concerns, Nikola certainly isn’t in favor among financial traders now.
Nikola Refocuses on Its Core Business
Nikola is so cheap now that it’s worth considering whether investors are completely ignoring the automaker’s positive points. I already mentioned the fact that Nikola’s Q1 2023 EPS was in line with Wall Street’s estimate. So, there’s nothing extremely shocking happening with Nikola’s bottom line.
Just maybe, NKLA stock is down so far that the only direction from here is up. It’s dangerous for short-sellers to ignore the reassuring words of Nikola CEO Michael Lohscheller, who declared that his company is “on the right path with our re-energized management and commercial teams, improved sales strategy, new dealers, and energy partners.”
Evidently, the “right path” for Nikola involves a refocusing on it’s core business: selling to the North American hydrogen fuel cell truck market. To achieve this, Nikola is selling its stake in the automaker’s European manufacturing joint venture to Iveco Group (OTCMKTS:IVCGF).
That sale will provide Nikola with $35 million in cash and 20.6 million shares of Nikola common stock. Just as importantly, Nikola can focus on the U.S. hydrogen fuel cell truck market, where the company states it has “competitive and first mover advantages.”
So, Will Nikola Stock Go Back Up?
Nikola stock is extremely risky, so it’s not a great idea to take a huge share position. Still, the stock has already priced in widely publicized negative news for Nikola. Therefore, contrarian investors might consider the upside potential.
I tend to think that NKLA stock will go back up, but there are no guarantees here. Now’s a great time to conduct a gut-check: How much risk can you handle? You can mitigate that risk by just holding a small number of shares in Nikola. It’s an interesting trade, I’d say, for audacious traders in an equally audacious company.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.