NKLA: Nikola vs. Hyliion: Which is a Better Buy?

Nikola Corporation (NKLA - Get Rating) and Hyliion Holdings Corporation (HYLN - Get Rating) are relatively new companies in the electric vehicle industry, and both made their stock market debuts through special-purpose acquisitions. While NKLA is involved in developing hydrogen fuel-cell-powered electric trucks, HYLN manufactures electrified powertrain solutions and battery management systems for EVs.

NKLA went public in June 2020 through SPAC with a blank check company Vector IQ. HYLN, on the other hand, entered into a reverse merger deal with Tortoise Acquisition Corp., generating $560 million in proceeds.

HYLN began trading on the New York Stock Exchange on October 2nd. HYLN has gained more than 97% in the past four months since the announcement of its merger with Tortoise Acquisition. However, the company lost 52.1% in less than one month of trading, over rising concerns over the efficiency of fuel power trains.

Contrarily, NKLA hit its 52-week high of $93.99 on June 9th, within 5 days of trading. However, the stock lost 82.2% since then, amid fraudulent acquisitions against former CEO Trevor Milton, as well as doubts over the performance of hydrogen-powered trucks. But which stock is the better buy now? Let’s take a look.

Latest Movements

On October 15th, HYLN partnered with American Natural Gas to offer discount pricing on renewable natural gas to its customers at American Natural Gas stations.

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On September 8th, NKLA entered into a strategic partnership agreement with GM for $2 billion in exchange for an 11% equity stake. This deal is expected to help NKLA cut down approximately $5 billion in costs over the next 10 years. Earlier this year, NKLA announced the sale of 23.90 million shares following an exercise of warrants.

NKLA’s founder and CEO Trevor Milton stepped down in September, amid allegations of misleading investors by overstating the company’s progress.

Recent Financial Results

NKLA generated $36,000 in solar revenues in the second quarter ended in June 2020. However, since solar installation projects are not related to the company’s primary operations, these are expected to be discontinued soon. Its German manufacturing facility Iveco’s Ulm is currently under construction and is expected to produce 10,000 units per year from the fourth quarter of 2021. NKLA is also building a production unit in Arizona, which is expected to deliver 30,000 trucks by the fourth quarter of 2021.

HYLN, being a relatively newer company, didn’t generate any revenue from operations in the second quarter ended June 2020. However, the company reported a net loss of $2.30 million, accruing to general, administrative, and tax expenses. It generated $110,000 as investment income in the last quarter.

Expected Financial Performance

HYLN expects to generate $1.10 million in revenues in 2020. The company plans to roll out a model electric power train in 2021, and thereby start commercial production by 2022. HYLN expects to generate $344 million in revenue in 2022, over $1 billion in 2023, and $2.10 billion by 2024.

NKLA is currently in the process of building infrastructure for its manufacturing facilities. Production of hydrogen-powered trucks is expected to begin by 2021, with 2,500 orders already in place. The company has announced plans to begin on-road testing in 2022, and thereby, begin bulk production by 2023. Analysts expect NKLA’s EPS to rise 2.3% next year, and at a rate of 21% per annum over the next five years. The consensus revenue estimate of $78.90 million for the full-year 2021 indicates a 78,800% surge year-over-year.

POWR Rating

Both NKLA and HYLN are rated “Sell” in our proprietary POWR Ratings system. Here’s how the four components of overall POWR Rating are graded for each of these stocks:

NKLA has an “F” for Trade Grade and Buy & Hold Grade, “D” for Peer Grade, and “B” for industry Rank. It is currently ranked #22 out of 29 stocks in the Auto & Vehicle Manufacturers industry.

HYLN also has an “F” for Trade Grade and Buy & Hold Grade, “D” for Peer Grade, and “B” for industry Rank. In the 20-stock Trucking Freight industry, HYLN is ranked # 18.

Verdict

Both NKLA and HYLN are yet to launch their products in the market. While both make strong arguments about their clean energy power trains and trucks, no proven track record of these EVs is available, raising concerns regarding the sustainability and efficiency of these products. However, the popularity of these companies generating higher price returns indicates a sign of overvaluation, making them extremely risky investments right now.

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NKLA shares were trading at $19.72 per share on Wednesday afternoon, down $1.67 (-7.81%). Year-to-date, NKLA has gained 91.09%, versus a 3.54% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...