Do you like roller-coaster rides? If not, then you probably shouldn’t invest in electric vehicle (EV) manufacturer Nikola (NASDAQ:NKLA). There’s actually some positive news to report about Nikola, but if you buy Nikola stock, be ready for a thrill ride that might not end well for you.
Nikola specializes in electric trucks for commercial use and the company has been the focus of controversy in the past. In particular, Nikola founder Trevor Milton was convicted of securities fraud as well as wire fraud a couple of years ago. Now, Nikola’s investors are left with the difficult task of predicting whether the shares will gain or lose value in 2024’s second half.
Some Good News About Nikola
First, we’ll start off with a couple of encouraging news items about Nikola. In this year’s second quarter, Nikola “wholesaled 72 Class 8 Nikola hydrogen fuel cell trucks.” Consequently, the automaker exceeded the 60-vehicle high-end of Nikola’s guidance range.
Furthermore, Nikola “wholesaled 112 hydrogen fuel cell trucks” during 2024’s first half. Therefore, Nikola CEO Steve Girsky feels that the company has maintained its “2024 momentum” so far.
Girsky also mentioned that Walmart’s (NYSE:WMT) Canadian operations are among Nikola’s customers. Indeed, it is true that Nikola delivered a hydrogen fuel cell-powered electric truck to Walmart Canada. Only time will tell whether Walmart Canada will order more trucks from Nikola in the coming quarters.
Maybe Walmart was just “testing the waters” with Walmart Canada’s single purchase of a Nikola electric truck. Although there’s no guarantee that this will actually happen, a new, bigger purchase order could significantly boost the Nikola share price.
Is This an Act of Desperation?
Now, I must report some not-so-good news. Nikola recently enacted a 30-for-1 reverse stock split.
Why is this potentially bad news? It’s probably a sign that Nikola is desperate to keep its share price up. After all, 30-for-1 is a big ratio for a reverse share split.
Around a year ago, the Nasdaq exchange notified Nikola that the automaker was at risk of being delisted from the exchange. That’s because Nikola stock had traded below the exchange’s minimum bid price of $1 for 30 consecutive days.
It’s usually not a good sign when a company enters into a cycle of share-price depreciation, followed by a delisting threat, followed by a reverse stock split. Hopefully, Nikola won’t make a habit of reverse-splitting its shares out of necessity.
Nikola Stock: The Key Is Position Sizing
Nikola is a small EV manufacturer that’s trying to grow bigger and keep its share price up. At this point, it’s difficult to predict whether Nikola will succeed in securing large-scale purchase orders.
Hence, $5 and $25 both look like possible destinations for Nikola stock. If you can handle the high risk level, feel free to buy a few Nikola shares. Just don’t overload your portfolio, as volatility will likely be the norm for the foreseeable future.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
