Nikola - the new Tesla?

The little known electric truck start up, which went public last week surged in value yesterday over taking the market cap of Ford $28.8 billion at several points in intra day trading, despite not yet selling a single vehicle.

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Nikola drove into the spotlight in yesterday. The little known electric truck start up, which went public last week through a reverse merger with VectorIQ, surged in value over taking the market cap of Ford $28.8 billion at several points in intra day trading, despite not yet selling a single vehicle.

Investors couldn’t get enough of Nikola. But was this a one-week wonder or is there more to the surge in popularity of the company?

What makes this stock special?
Nikola is developing both commercial and passenger vehicles using battery and hydrogen fuel-cell technology. The firm is targeting the commercial trucking sector at a time when the likes of Amazon, United Parcel Force and other road haulage companies have pledged to reduce their carbon emissions. They say timing is everything.

The company is also aiming at the pickup truck market for individual consumers, this also happens to be the most profitable segment of the US car market.

Nikola is planning a manufacturing facility in Arizona and reportedly boasts reservations for 14,000 fuel cell electric trucks, which it says is worth around $10 billion of sales, with names including Anheuser-Busch and US Express. Questions remain over whether these are done deals under contract. However, what is certain is that here is considerable interest in these zero emission hydrogen fuel trucks from across the road haulage industry.

Is this the new Tesla?
Nikola allows traders to bet on the growth potential of electric transportation, in a similar way to Tesla.

Tesla shares have more than doubled this year whilst more traditional automobile companies such as Ford and General Motors have been hammered. Traders are increasingly favouring electric cars and future technology even as the US and global economy faces a deep recession.

In the same way that Tesla captured the imagination of trades and investors, Nikola could do so as well, in a complementary manner.

There is little doubt that we are currently on a journey shifting from fossil fuel energy to electric. Nikola, despite forecasting 0 revenue in 2020,  and not expecting to fully use its Arizona assembly plant (which it hasn’t built yet) until 2028, is ahead, well down the road to a production line and expecting to generate revenue next year. 

With big names lining up this stock could be more than hot air, although it could face the similar struggles as Tesla with valuation.

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