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Reversal Drops Nasdaq 222; Nikola Challenged; SunPower Darkens Outlook

By Dan Caplinger – Sep 10, 2020 at 5:08PM

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Respite from the declines proved short-lived.

The stock market has been resilient in 2020, but skeptical investors wonder how long the good times can last. For the Nasdaq Composite (^IXIC) in particular, record highs have come even in the face of challenging conditions. That's made the pullback that started last week long overdue, and on Thursday, the Nasdaq gave back much of its bounce from the previous session, falling 222 points.

The decline was broad-based, with nearly all of the top stocks in the market seeing declines. Nikola (NKLA -5.61%) and SunPower (SPWR -5.86%) stood out on the Nasdaq, however, as they represent two sides of the same transformation away from fossil fuels toward the sustainable generation and use of electrical power. Even though those companies have prospered, they nevertheless saw their stocks give up ground on Thursday.

A bearish view on Nikola

Shares of Nikola dropped 13%, giving back much of its gains from earlier in the week. Even with a deal with General Motors (GM -2.68%) in the works, some investors aren't certain about Nikola's ability to lead the way forward in the electric-vehicle industry.

Nikola Badger pickup truck on a sand platform in a desert climate.

Image source: Nikola.

Analysts at Hindenburg Research came out with a highly negative view on Nikola. The short-selling specialist spared no effort in panning the EV truck company and founder Trevor Milton. Among the allegations in the Hindenburg report were that Nikola's battery and fuel-cell capabilities aren't as far along as some had thought.

Hindenburg also criticized the GM collaboration, noting how surprising it was to see that GM would provide its own battery and fuel-cell technology for commercial tractor-trailer trucks under the arrangement. That seemed to fly in the face of Nikola's claims about having superior battery technology of its own.

Milton responded to Hindenburg's report in a tweet, promising to rebut the short-selling company's claims. Yet that didn't happen before the market close, leaving Nikola shares near their lows of the day.

A cloud over SunPower

Solar energy company SunPower saw its stock drop as well, falling 9%. The company announced its latest guidance for 2020, and investors weren't satisfied with what they saw.

SunPower expects that fiscal fourth-quarter revenue will come in between $330 million and $3780 million, producing net income of between $0 and $10 million. The company expects to have capacity of 150 to 170 megawatts.

For the full fiscal year, SunPower believes its revenue will be in a range of $1.06 billion to $1.1 billion. Minimal net income of $30 million to $40 million for the year is expected, and production of between 465 and 510 megawatts is likely.

Investors have been excited about SunPower lately, especially given its spinoff of its international business into Maxeon Solar Technologies in late August. Yet even though the U.S.-focused residential and commercial solar company  will be an attractive pure play on the success of solar domestically, it still has to prove it can keep growing at a respectable rate.

Dan Caplinger 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.

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Stocks Mentioned

NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,176.41 (%)
SunPower Stock Quote
$23.12 (-5.86%) $-1.44
Nikola Corporation Stock Quote
Nikola Corporation
$3.70 (-5.61%) $0.22
General Motors Stock Quote
General Motors
$34.84 (-2.68%) $0.96

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

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