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June 8, 2020

Nikola Motors Price Up 500% Since February! What Now?

Frank Cabibi

Featured Photo: https://nikolamotor.com/assets/motor/badger/badger_photos/nikola_badger8-57c6de42ad8de13f0fcc32e02d53bab447b950c148decc2ccde27dacae892778.jpg

In one of my previous articles, we talked about VTIQ and its merger with Private Company, Nikola Motors, which flew 18% on news the day before the shareholders' vote on the merger. Since then, the price has jumped 71% since its last close as the company plans to open reservations on its new Badger pick up truck. With a 0-60 mph of 2.9 seconds, the Badger takes the prize over the Toyota Tundra TRD Supercharged with a time of 4.4 seconds.

Now that all good news is out for the meantime, prices are trading at 10x their prices since February this year. IVECO was an early investor in the game, and it now owns a little over 7% of Nikola's market cap. Shareholders who owned the stock previous to the vote on June 2 received 1.9 shares for every one share they owned, and now IVECO owns over 25 millions shares.

What Now?

With all good news released about Nikola, what's going to happen to Nikola from here?

As you may know, the company has received over 14,000 pre-orders for their semi trucks, which will all have to be made. So far, only prototypes have been approved to be used and masses of semis will have to be manufactured. This is going to cost a lot of money. With their potential competitor, Tesla, Nikola is trying to take the transportation scene. Instead of making very nice electric cars/trucks, Nikola will make semi and pickup trucks with main focus on their 18-wheelers. These vehicles will costs lots of money to produce as manufacturing plants and vehicles must be produced. They also need to make several hydrogen filling stations around the country for these trucks to fuel up. This will put the company in debt in the beginning which isn't necessarily a bad thing. Nikola will work the debt as an asset to the company and invest in mass producing these many-ton trucks.

Nikola has already turned good profits as an LLC. On their income statement, they have generated great profits for 2018 and 2019. With 360 million shares outstanding, Nikola is worth about $12 billion. By 2023, Nikola projects $1.4 billion in sales.

https://www.marketwatch.com/investing/stock/nkla/financials

Tesla cars usually range in between $35,000 and $124,000 while Nikola semis will be around $180,000. I know this is like comparing apples and oranges because semi trucks obviously cost more than the average car, but what to keep in mind is operating cost. Although these trucks are expensive relative to standard semis, it is expected that these vehicles will cut down on maintenance cost, and run longer than standard diesel ones. In other words, it is more attractive to companies to pay $30K more to have a more reliable, efficient and green transportation vehicle.

Conclusion

In the end, investors look to Nikola as a safer and cleverer alternative to transportation like Tesla. For the longest time, Tesla didn't make any profit, yet the stock price traded higher than any other car company. Tesla's market cap of $93 billion is also much larger than Nikola's $12 billion. NKLA saw a huge jump in price this morning and is around $56 at the time of posting this. If you're a trader, you may be looking to get out, if you're an investor, you're probably looking forward to the next few years with this company. And maybe, in time, it will be right up there with Tesla.

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Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

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