Please ensure Javascript is enabled for purposes of website accessibility

Why Nikola Stock Is Down Today

By John Rosevear – Jun 10, 2020 at 12:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Tesla and Ford just gave Nikola fans a reality check.

What happened

Shares of electric-truck maker Nikola (NKLA -7.49%) were lower on Wednesday, after rivals Tesla (TSLA -6.01%) and Ford Motor Company (F -1.70%) clarified their plans for the upcoming electric trucks that Nikola hopes to challenge. 

As of 12:15 p.m. EDT today, Nikola's shares were down about 10.7% from Tuesday's closing price.

So what

First, a bit of context: While Nikola's shares were down 10.7% as of noon on Wednesday, they were still up almost 98% since Monday morning. It has been a very good week for the company's shareholders.

That said, a bit of reality may be starting to set in. 

First, Reuters reported that Tesla CEO Elon Musk told employees on Tuesday evening that the company will now focus on getting its electric Class 8 truck, the Tesla Semi, into production. The Semi is expected to compete directly with Nikola's upcoming core products, Class 8 tractor-trailer trucks powered by batteries and fuel cells.

Second, in a presentation to analysts this morning, Ford COO Jim Farley confirmed that the company will bring its promised battery-electric F-150 pickup to market within 24 months. An all-new F-150, to be offered in both internal-combustion and hybrid-electric versions, is expected late this year.

Farley's announcement threw a damper (or should have) on the bold statements from Nikola chairman Trevor Milton in recent days. Milton has said that Nikola will show its own electric pickup, called the Badger, at an event later this month, and that the company's goal is to outsell the F-150. 

A rendering of a Nikola Badger electric pickup truck.

Will Nikola's Badger outsell Ford's F-150? Not anytime soon: For starters, it's just a concept right now. Image source: Nikola.

Now what

Milton has done a lot of talking since his company's debut on the public markets last week, following its reverse merger with VectoIQ Acquisition (VTIQ). It's not surprising that two of the companies that could turn out to be Nikola's fiercest competitors did a bit of talking of their own over the last day, as if to remind excited investors that Nikola is far from the only company entering the electric big-rig and pickup markets. 

Given the team that Nikola has assembled, and its progress to date, some investor optimism is certainly justified. But investors (particularly those new to the automotive space) should keep in mind that this is an exceptionally difficult business, with high costs, long development times, substantial economic risks, and slim profit margins. 

Be prepared for the possibility that Nikola's stock will have a bumpy ride over the next few months. 

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nikola Corporation Stock Quote
Nikola Corporation
$3.27 (-7.49%) $0.27
Ford Motor Company Stock Quote
Ford Motor Company
$12.15 (-1.70%) $0.21
Tesla, Inc. Stock Quote
Tesla, Inc.
$223.82 (-6.01%) $-14.30
VectoIQ Acquisition Corp. Stock Quote
VectoIQ Acquisition Corp.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.