Please ensure Javascript is enabled for purposes of website accessibility

Why Nikola Stock Sank 21.6% in February

By Keith Noonan - Updated Mar 4, 2021 at 9:29AM

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

The electric vehicle stock is now down 82% from its 52-week high.

What happened

Shares of Nikola (NKLA 3.21%) fell 21.6% in February, according to data from S&P Global Market Intelligence. Growth-dependent stocks saw a steep sell-off at the end of the month, and the electric vehicle (EV) company's valuation sank amid volatility for the broader market. 

NKLA Chart

NKLA data by YCharts

Electric Vehicle stocks have generally put up stellar gains over the last year, and Nikola stock has climbed roughly 44% across the stretch despite recent volatility. Rising Treasury bond yields combined with concerns about valuations in the tech sector prompted substantial sell-offs at the end of February, and the EV specialist's share price has been pressured amid the pullback. 

A Nikola semi-truck EV.

Image source: Nikola.

So what

Nikola stock reached a high of roughly $94 per share last year, spurred on by anticipation for a potential partnership with GM and excitement for the overall EV space. However, the partnership with GM wound up being scaled back substantially, and Nikola stock's subsequent performance has been underwhelming compared to high-flying category leaders including Tesla and NIO

While Nikola's gains have lagged those of top EV players, its valuation remains highly speculative because the business has yet to deliver vehicles in meaningful numbers. Nikola has a market capitalization of roughly $6.5 billion and is valued at approximately 400 times this year's expected sales, and it's not surprising that its stock has been pressured as the market has reassessed growth-dependent valuations.

Now what

Nikola stock has continued to slide early in March's trading. The company's share price has dipped roughly 8.7% in the month so far. 

NKLA Chart

NKLA data by YCharts

The overall EV space will likely see explosive growth through the next decade and beyond, and Nikola's focus on semi-truck designs and other commercial vehicles could help it tap into growth in those categories. However, the industry is becoming increasingly competitive, and Nikola's first-mover status in the commercial vehicle niche has yet to result in substantial revenue. The outlook for its Badger pickup truck also remains unclear. So, while Nikola has recently seen substantial sell-offs and trades well off its 52-week high, the stock remains a risky investment.  

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
$6.11 (3.21%) $0.19

*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 service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

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.