Is it Time to Cut Nikola Losses Ahead of Secondary Stock Offering? 3 Red Flags for Investors

Nikola (NKLA), the electric truck manufacturer that has lost 96% of the value it had at IPO, appears to be poised to fall even lower.

The company issued a press release expressing interest in a secondary stock offering to raise another $100 million. It’s also likely that the company will offer a private sale of stock if it’s unable to raise that full $100 million.

Nikola’s plan is to price this secondary offering at $1.12/share, which sits below its current price per share of $1.22. Citigroup – who will be the underwriter on the offering – is granted the option to buy an additional $15 million worth of NKLA.

In its press release, Nikola mentioned that the goal with these additional funds is to bolster working capital on hand for general purchases. After losing a staggering $222 million in the final quarter of 2022, the electric truck maker was left with just $233 million in cash on hand. However, the company is taking steps to right the ship – increasing production this year up to 350 new trucks from last year’s 250.

With that said, the market reacted negatively to this news – and rightfully so. Shares tanked 23% in a single day after the press release went out. This leaves the company in dire straits, as they’re already down more than 45% in the first few months of 2023.

Considering how far the company has fallen from its initial public offering just under 3 years ago – when it debuted at $30.28/share and climbed as high as $65/share – it’s fair to wonder if now is the time to cut losses on this stock. Below, we’ll share the 3 red flags we’ve uncovered through the VectorVest stock analyzing software to help you make your next move.

NKLA Has Poor Upside Potential With Very Poor Safety & Timing

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It’s all possible through the proprietary stock rating system, which gives you all the information you need in just three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each of these sits on its own scale of 0.00-2.00, with 1.00 being the average for effortless interpretation.

As for NKLA, there isn’t much for investors to remain hopeful about…here’s the current situation:

• Poor Upside Potential: The RV rating assesses a company’s 3-year price projection in comparison to AAA corporate bond rates and risk, giving you a more clear understanding of the stock’s true value in the big picture. Even at seemingly rock bottom, there’s not much hope NKLA can get better - with a poor RV rating of just 0.69.
• Very Poor Safety: In terms of risk, NKLA has very poor safety - as evidenced by the RS rating of 0.47. This is derived by analyzing the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
• Very Poor Timing: Finally, NKLA has a very poor RT rating of 0.16 - suggesting strong downward pressure on the stock’s price. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.

The overall VST rating for NKLA is very poor at 0.47. Does that mean it’s officially time to cut losses on this stock - or is there any reason to hold onto hope? If you’re currently invested in NKLA, you’re not going to want to miss this clear buy, sell, or hold recommendation - get a free stock analysis today.

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VectorVest advocates buying safe, undervalued stocks, rising in price. As for NKLA, it has poor upside potential along with very poor safety and timing. It may be time to cut losses - so you need to see the current recommendation from VectorVest.

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