Nikola stock price analysis: NKLA could plunge by 62% soon

Nikola (NASDAQ: NKLA) stock price retreated on Thursday as smaller-cap electric vehicle companies plunged. The shares crashed by more than 6% as its short interest surged to more than 22.50%. It has dropped by more than 63% in the past 12 months and 40% this year.

Nikola Motors has been a big disappointment for investors. People who bought the stock at its peak in 2020 have lost more than 98% of its value. It is not alone. Other companies like Lucid Motors, Rivian, VinFast, and Canoo have also lost most of their funds.

As I wrote in my recent article on Mullen Automotive, many of these companies are facing multiple headwinds as interest rates rise. For example, Rivian has already incinerated more than half of the $12 billion it raised when it went public. It is also losing over $30,000 for all vehicles it sells.

Nikola has moved from one crisis to another. The most recent crisis was that it was forced to recall most of its battery-electric trucks in an operation that cost it millions. 

Nikola is also incinerating cash as it works to launch its hydrogen trucks. As a result, in August, the company raised $328 million by selling convertible notes. Convertible notes are bonds that can be converted into shares by the holders.

Nikola Motors ended last quarter with $243 million in cash and short-term investments. As such, the company had over $570 million. As it moves towards manufacturing, it will need much more money than that since it burned over $143 million in the last quarter.

For example, Rivian, which has billions of dollars in cash, just announced a huge cash raise as it seeks to ramp up production. Lucid Motors has only survived because of the cash infusion from Saudi Arabia. 

The challenge for Nikola Motors is that it is disrupting a very young industry with no cash. For one, it will still need to invest huge sums of money on hydrogen infrastructure. Its vehicles will also be sold in limited places, as I wrote here.

The daily chart shows that the NKLA stock price has been an underperformer for a long time. The shares have crashed below the 50-day and 100-day moving averages. They have also retreated by more than 63% from the highest point in August. 

Also, the stock is below the important resistance level at $1.76, the highest point on September 19 and 29th. Therefore, the shares will likely continue falling as sellers target the key support at $0.50, the lowest point in June. If this happens, the stock will drop by about 62%.

The post Nikola stock price analysis: NKLA could plunge by 62% soon appeared first on Invezz.