Markets

Nikola Founder Replies to Deutsche Bank Warning

One day after a major Wall Street analyst sounded a cautionary note about the stock of Nikola (NASDAQ: NKLA), the founder and executive chairman of the would-be electric truck manufacturer did his darnedest to combat the negative news with an early afternoon tweet reminding everyone that July 23 is the day Nikola will break ground on its first factory.

Nikola stock shed 4% of its market cap on Thursday, then lost a further 7% on Friday morning in response to Deutsche Bank initiating coverage of the stock with a hold rating. Deutsche warned that while Nikola's story sounds good, investors are taking on a "large execution risk" with a revenue-less electric truck maker that has yet to make a single truck.

And so today, Nikola founder and executive chairman Trevor Milton reasserted his promise to execute.

Nikola Badger electric pickup truck concept.

The Nikola Badger electric pickup truck concept. Image source: Nikola.

Because of coronavirus concerns, Milton said, only invited guests will attend the groundbreaking for the factory in Arizona. But to prove that he really does have shovels moving earth, he promised to film it for everyone to see.

Investors appear willing to accept this as proof that Nikola is, as it says, "getting closer and closer to production," and Nikola's stock is already starting to edge back up. But as my fellow Motley Fool John Rosevear points out, the factory won't begin operating for another year, and appreciable sales could still be five years away.

A lot can happen in five years. In 2016, for example, another start-up I followed, Vector Space, announced it would break ground on a factory to build orbital space rockets. It never did get to space, and three years later, Vector was bankrupt and sold off for parts.  

That's not to say the same thing will happen with Nikola. But it is to say that there's a long road to travel between announcing a factory and earning a profit.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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