When it comes to electric-vehicle companies, few of them are more divisive than Nikola (NASDAQ:NKLA). It’s not difficult to find topics of contention and heated debate surrounding NKLA stock.
One thing we can’t deny, though, is that NKLA stock is popular among traders. That would include both the buyers and the short sellers. For instance, on the afternoon of Nov. 25, NKLA easily surpassed 30 million shares traded.
That’s pretty intense for a holiday week. Also on that day, NKLA stock was down 10% midday. One of the catalysts causing this downward pressure was a big-bank analyst’s opinion regarding a crucial partnership.
This leaves us with a billion-dollar question. Is the partnership between Nikola and a major automaker really in trouble? Or, is this just an instance of analyst speculation and unfounded bearishness? Read on as we separate the facts from the assumptions, and hopefully come to an informed conclusion about NKLA stock.
A Closer Look at NKLA Stock
On Nov. 11, I issued a hearty recommendation in favor of NKLA stock. Specifically, I advised that traders should ignore the governmental gridlock and consider owning NKLA shares anyway.
At that time, the NKLA stock price hovered around the $20 level. On the afternoon of Nov. 25, the share price was more than 50% higher than that. To be more precise, it was close to $31.
The point here is not to brag about my highly questionable predictive abilities. Rather, I want to emphasize that listening to the worriers and the naysayers isn’t necessarily healthy for your portfolio.
To enhance your bottom line as an investor, it’s best to ignore the commentators who base their opinions on fear and greed. If you follow them, you might end up selling at the bottom and buying back at the top.
As for NKLA stock, the share price pulled back to the $17 area on the morning of Dec. 1. Thus, enterprising traders were granted another chance to own NKLA shares at a more favorable price point.
A History of Haters
It’s not often that you’ll see a stock that has passionate critics like NKLA does. Much of the controversy is centered on Trevor Milton, who has been at the center of scandals involving allegedly highly inappropriate personal behaviors.
Even if we ignore Milton’s personal issues and focus on the company, there’s no shortage of scandalous accusations. One prominent example would be the time when, back in September, research firm and short seller Hindenburg Research published a scathing report charging Nikola with “an intricate fraud built on dozens of lies.”
Not very long after that, Citron Research posted a scathing tweet. “Congrats to Hindenburg for exposing what appears to be a total fraud… [Nikola’s] response warrants an SEC investigation to maintain integrity of EV mkt,” Citron wrote.
Citron’s tweet was published on Sept. 11, and NKLA stock declined after that. However, the share price did recover. To me, this only serves to illustrate that Nikola can survive the firestorm of scathing reviews.
An Analyst Gets Skeptical
More recently, JPMorgan analyst Paul Coster expressed skepticism that Nikola would reach a partnership deal with automotive giant General Motors (NYSE:GM). In September, General Motors had announced plans to build versions of Nikola’s electric truck, known as the Badger.
My issue with Coster’s skepticism is that neither General Motors nor Nikola provided a concrete indication that a deal between the two automakers is completely off the table.
And in fact, Nikola CEO Mark Russell said that the talks with General Motors about supplying fuel cell and battery technologies are continuing.
If anything, Russell’s tone seems eminently optimistic. “… we believe that as we execute on our milestones and on our business plan, we’re going to reward our long-term focus shareholders,” commented the Nikola CEO.
Moreover, a very recent update from Nikola confirms that the company signed a new supply agreement with General Motors. The memorandum of understanding for this agreement “supercedes and replaces” the deal announced on Sept. 8.
Granted, the new MOU doesn’t include a previously announced General Motors equity stake. Furthermore, reportedly Nikola’s plans to build the Badger electric pickup truck have been scrapped. Nonetheless, it appears that the supply agreement between the two companies is firm and that’s encouraging.
The Bottom Line
I advised that traders should ignore the NKLA stock critics in a previous article, and the share price went up 50%.
Today, I’m doubling down against the NKLA haters. Even if the latest critic is a prominent big-bank analyst and the share price has pulled back, this doesn’t necessarily mean that Nikola and its stakeholders are in any real trouble.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
