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Nikola Stock Could Be a Long-Term Winner

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Nikola (NASDAQ:NKLA)is one of the latest entrants into the electric-vehicle (EV) segment,  and it will be drawing lots of attention for years to come. Demand for EVs in the U.S. is stabilizing, and the market has proven its staying power. EVs will not be a passing fad. Tesla (NASDAQ:TSLA) has become the largest automobile manufacturer by market capitalization. But there are many varied, exciting names in the space, including Nikola stock. 

The Nikola (<a href=NKLA) website homepage on a cell phone screen." width="300" height="169">Source: Stephanie L Sanchez / Shutterstock.com

Workhorse (NASDAQ:WKHS) is looking to corner the delivery portion of the industry. Rivian is working on a pickup truck and is building electric vans for Amazon (NASDAQ:AMZN). Lucid (OTCMKTS:LCDX) will produce a large sedan. Nikola will be looking to dominate the heavy-duty, tractor-trailer sector of the market. Currently many investors are gathering information about all aspects  of Nikola and are trying to determine if Nikola stock is worth buying. 

Important Information About Nikola

The company broke ground on its Arizona plant on July 22. Nikola will manufacture  heavy duty trucks in two different plants. One facility will be located in Arizona, while the other will be in Germany, where the company’s trucks will initially be produced. 

Nikola will make battery-powered trucks and trucks that are propelled by hydrogen fuel cells. According to Barron’s, consumers can expect  Nikola to start rolling out trucks sometime between early 2022 and late 2023. Importantly, once the Arizona manufacturing facility is online, it will serve the U.S. market, while the German facility is making trucks for the European market. 

Nikola plans to produce four trucks. Three of its trucks will be tractor-trailer vehicles, and the fourth will be a pickup called the Badger. Nikola will also make sports vehicles,  including a jet ski and two 4-seater off-road vehicles. 

The Owners of Nikola Stock Should Buckle Up

Investors who buy the shares of EV startups are in for a wild ride. Analysts’ price targets on these stocks are almost guaranteed to be off the mark. Many of these equities appear to be overvalued.

But investors also watched as NIO (NYSE:NIO) rocketed upward over the past year. Investors who got in at its low point of $1.19 and exited at its peak of $16.44 realized a 1,282% profit. And even those investors who bought the shares for $4-$6 are thrilled with Nio’s current $13.30 share price. Nikola however, has not been nearly as kind to investors. 

Nikola Took a Beating in June and July 

Nikola’s shares traded at roughly $10 throughout April and into early May. By June 9, the shares had rocketed above $79. From there, they steadily declined to around $29 before rallying recently to around $38. Some investors have profited handsomely from the shares and others have taken a beating. 

Prior to Nikola’s IPO, the company issued millions of warrants which allowed their owners to purchase Nikola stock for $11.50. As the stock price rocketed upward, the owners of the warrants looked to cash them in, putting downward pressure on the share price over the last several weeks. Analysts believe that most of the downward pressure from the warrants is over. 

Nikola’s Earnings

Nikola stock’s next fundamental catalyst will be its Q2 earnings report which is expected to be released today after the market closes.  Investors shouldn’t expect the company’s earnings to include any earth-shattering information. Nikola has likely been incurring significant costs as it attempts to execute on its plans. Significant costs and meaningful risks will define Nikola for years to come.

Play or Pass?

The investors who choose to purchase Nikola shares at this point are speculating.  Its shares will continue to trade at a very high price-earnings multiple. That alone shouldn’t scare investors away, though. In the coming quarters, investors should evaluate Nikola’s ability to execute on its plans and meet its production milestones. Investors should also keep a keen eye on the company’s costs. 

Those who like high-risk stocks with high potential returns should buy Nikola stock  now. Value investors who like to have a lot of information before buying a stock will not buy the shares for a few years. 

As of this writing, Alex Sirois held no shares of any of the aforementioned stocks.

 

The post Nikola Stock Could Be a Long-Term Winner appeared first on InvestorPlace.

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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