Nikola Corporation (NKLA - Get Rating) beat its revenue estimates by 10.1% for the 2022 third quarter. Its revenue came in at $24.24 million. However, it missed EPS estimates by 9.2%. Its EPS came in at negative $0.54.

Recently NKLA and ChargePoint Holdings, Inc. (CHPT), a leading electric vehicle (EV) charging network, announced their partnership to accelerate the deployment of EV charging infrastructure for fleets across the U.S.

However, amid declining demand, NKLA cut its 2022 outlook. It planned to build between 300 and 500 trucks by the end of 2022 but reduced it to 255 and 305 trucks. Moreover, the company laid off 7% of its employees, citing widespread macro headwinds.

NKLA has lost 16.9% over the past month to close the last trading session at $2.46. It has lost 75.1% year-to-date and 62.1% over the past six months.

Here is what could shape NKLA’s performance in the near term:

Weak Balance Sheet

NKLA’s cash and cash equivalents came in at $315.73 million for the period ended September 30, 2022, compared to $497.24 million for the period ended December 31, 2021. Its total current assets came in at $486.92 million, compared to $524.73 million for the same period.

Also, its long-term debt came in at $283.26 million, compared to $25.05 million, while its total liabilities came in at $595.40 million, compared to $296.25 million.

Unfavorable EPS Estimates

Analysts expect NKLA’s EPS to decline 87% year-over-year to negative $0.43 for the quarter ending December 2022 and 76.2% year-over-year to negative $0.37 for the quarter ending March 2023. Moreover, its EPS is expected to decrease 44.3% year-over-year to negative $1.14 in 2022 and 18.4% year-over-year to negative $1.35 in 2023.

Poor Profitability

NKLA’s trailing-12-month gross profit margin of negative 133.29% is lower than the industry average of 29.09%. In addition, its trailing-12-month ROCE, ROTC, and ROTA of negative 113.47%, 55.93%, and 62.24% are compared with the industry averages of 14.16%, 6.81%, and 5.35%, respectively.

POWR Ratings Reflect Bleak Prospects

NKLA has an overall rating of F, equating to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. NKLA has an F grade for Quality, consistent with its negative profitability margins.

It has a D grade for Value. Its forward EV/Sales of 16.77x is 903.9% higher than the industry average of 1.67x, and its forward Price/Sales of 15.66x is substantially higher than the 1.26x industry average.

In the 62-stock Auto & Vehicle Manufacturers industry, NKLA is ranked last. The industry is rated D.

Click here for the additional POWR Ratings for NKLA (Growth, Momentum, Stability, Sentiment).

View all the top stocks in the Auto & Vehicle Manufacturers industry here.

Bottom Line

NKLA’s growth prospects look grim. Moreover, it is trading near the 52-week low of $2.27, which it hit on November 22, 2022. Given the stock’s bleak fundamentals, NKLA might be best avoided or sold short now.

How Does Nikola Corporation (NKLA) Stack up Against Its Peers?

While NKLA has an overall POWR Rating of F, one might consider looking at its industry peers, Isuzu Motors Limited (ISUZY - Get Rating), Suzuki Motor Corporation (SZKMY - Get Rating), and Subaru Corporation (FUJHY - Get Rating), which have an overall A (Strong Buy) rating.

NKLA shares rose $0.03 (+1.22%) in premarket trading Wednesday. Year-to-date, NKLA has declined -74.87%, versus a -16.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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