Please ensure Javascript is enabled for purposes of website accessibility

Why Nikola Stock Was Down This Morning

By John Rosevear – Jun 11, 2020 at 10:55AM

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

It's reality-check time for the broader market.

What happened

Shares of electric-truck start-up Nikola (NKLA 2.96%) were trading lower on Thursday morning, amid a broad market decline as investors digested sobering reports of increasing numbers of COVID-19 cases from parts of the United States that reopened early.

As of 10:30 a.m. EDT, Nikola's shares were down about 6.4% from Wednesday's closing price.

So what

U.S. coronavirus cases are still rising: There are now more than 2 million confirmed cases, with rising numbers in large states -- including Florida, Texas, and California -- that have moved to reopen their economies in recent weeks. 

For markets generally, the concern should be obvious to investors: If economic activity in the U.S. has to be re-restricted, or if consumers decide to self-restrict on continued virus fears, that will be bad news for a long list of companies. 

A Nikola electric tractor-trailer truck.

Nikola will launch its first electric heavy truck late next year. But the COVID-19 pandemic could still hurt it in the near term. Image source: Nikola.

That said, a rising wave of new infections won't necessarily affect Nikola, which is still a year or more away from shipping its first products. But falling consumer confidence could affect the number of companies willing to pony up cash deposits for its electric heavy trucks, and the number of individuals willing to order the company's promised electric pickup truck.

Now what

More broadly, the rising number of coronavirus cases is one in a series of reality checks for investors, including auto investors who have jumped on Nikola's shares over the last week. The reality for Nikola is that right now, it's a company with no revenue that looks likely to face stiff competition when it brings its products to market over the next couple of years. 

As always, trade carefully.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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
NKLA
$4.00 (2.96%) $0.12

*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
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

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.