DA Davidson reiterated a Neutral rating on EV maker, Nikola Corp. (NASDAQ:NKLA) and cut their 12-month price target on the stock to $2.50 (From $3.00) following the automaker’s 2Q earnings release and conference calls with management.
DA Davidson analysts believe that the company is on track to decrease its cash burn to $400 million per year by the year's end. The provided guidance on implied exit run rates offers some insight into the cost side. The R&D costs, which started the year at approximately $70M per quarter, will be scaled down to around $35M per quarter. Additionally, the SG&A costs, which began the year at approximately $80M per quarter, will be reduced to about $30M per quarter.
Taking these adjustments into account, along with grant money and additional partnerships to offset investment in fueling infrastructure, NKLA aims to secure $600M in capital needs going forward. Lower than what was initially anticipated.
Nikola showed excitement over the company’s "first mover advantage" in FCEVs, and what it could mean for the automaker’s pricing and gross-margin breakeven. However, it is less clear what might happen when considering the arrival of competitors with their FCEVs or the wider availability of alternative zero-emissions options from other OEMs. At present, NKLA seems to have a monopoly, and even with the launch of other FCEVs, NKLA may maintain a competitive edge in securing hydrogen supply and fueling stations in crucial markets.
DA Davidson’s 2023 revenue estimate was cut to $124.9M (from $150.1M). The new 2024 estimate is $452.0M (from $816.6M).
The electric automaker also recently went through another CEO transition after the company announced that Michael Lohscheller will be stepping down from the position for family reasons. Nikola named Steve Girsky to replace Lohscheller, becoming the company’s 4th CEO in as many years.
“Management change-over is a risk,” wrote the analysts, “especially as a new CFO also takes the reins.”
Shares of NKLA are down 12.4% in early trading Monday morning.