Inside Nikola’s Newly Added Risk Factors

Nikola Corporation (NKLA) is an American electric vehicle company focused on building battery-powered heavy-duty commercial vehicles. 

For Q4 2021, Nikola did not report any sales, missing the consensus estimate of $2.6 million in revenue. It posted an adjusted loss per share of 0.23, which worsened from a loss per share of $0.17 in the same quarter the previous year but beat the consensus estimate of a $0.32 loss per share.

Nokia plans to begin production of its Tre truck in March and expects to deliver between 300 and 500 trucks to customers in 2022. The company has signed Proterra (PTRA) on a multi-year contract to supply it with battery packs for its vehicles. Nikola says that customers in California could qualify for a $120,000 subsidy toward the purchase of its electric trucks.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Nikola.

Risk Factors

According to the new TipRanks Risk Factors tool, Nikola’s main risk category is Finance and Corporate, with 21 of the total 62 risks identified for the stock. Production and Legal and Regulatory are the next two major risk categories with 15 and 9 risks, respectively. Nikola has recently updated its profile with four new risk factors.

Nikola tells investors that it does not know exactly how many shares it will have to sell under its share purchase agreement with Tumim. It explains that Tumim has agreed to purchase up to $600 million worth of its shares. But the price at which those shares are sold will fluctuate. The company further says that it may have to issue more shares than it has registered for sale, which may require shareholder approval. Additionally, Nikola cautions that shares issued to Tumim will dilute the interest of existing shareholders.

The company informs investors that it has been able to address the weakness that it had identified in its internal controls regarding certain account issues. But the company cautions that similar issues could arise in the future. It cautions that if it is unable to remedy such control issues, its ability to deliver accurate financial information could be adversely impacted, which could result in violations of securities laws and undermine investor confidence in Nikola’s financial statements. Moreover, the company warns that its stock price and access to capital markets may be adversely impacted.

Nikola tells investors that it operates in a complex regulatory environment. For example, it mentions that it is subject to various data privacy and security laws, such as the EU’s GDPR. The company cautions that failure to comply with the regulations could adversely affect its business, expose it to significant fines, and harm its reputation.

Analysts’ Take

D.A. Davidson analyst Michael Shlisky recently maintained a Hold rating on Nikola stock but lowered the price target to $8 from $12. Shlisky’s reduced price target suggests 5.96% upside potential.

Consensus among analysts is a Hold based on 1 Buy and 6 Holds. The average Nikola price target of $10.43 implies 38.15% upside potential to current levels.

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