What Happened?

Shares of electric vehicle manufacturer Nikola (NASDAQ:NKLA) fell 10.1% in the morning session after the company reported weak third-quarter earnings. Although it shipped more trucks than expected, Nikola missed analysts' revenue, EBITDA, and EPS estimates. Notably, NKLA remained unprofitable, with the margin profile implying more losses even at the gross margin level. This puts more strain on its balance sheet as the company continued to burn cash. Overall, this quarter could have been better.

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What The Market Is Telling Us

Nikola’s shares are extremely volatile and have had 84 moves greater than 5% over the last year. But moves this big are rare even for Nikola and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 3 months ago when the stock gained 19% on the news that the company reported second quarter earnings. Nikola blew past analysts' revenue expectations. Adjusted EBITDA loss was also better than expected. The company sold (wholesale) 72 hydrogen fuel cell electric vehicles in Q2, exceeding the high-end of previous guidance, which shows demand momentum. Zooming out, while the company still lacks scale and profits, we think this quarter featured some important positives.

Nikola is down 84.3% since the beginning of the year, and at $3.93 per share, it is trading 88.7% below its 52-week high of $34.80 from November 2023. Investors who bought $1,000 worth of Nikola’s shares 5 years ago would now be looking at an investment worth $12.70.

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