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Nikola Corporation (NKLA)

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  • Electric Carmakers Are in a Stock Market Bubble

    Electric Carmakers Are in a Stock Market Bubble

    (Bloomberg Opinion) -- The chief executive officer of Volkswagen AG, Herbert Diess, has predicted that within five to 10 years the world’s most valuable company will be a carmaker. Given how much investors have been bidding up the shares of Tesla Inc. and other electric vehicle stocks, it might happen sooner.Tesla’s market value soared past $540 billion this week — equivalent to 250 times its expected earnings this year — meaning it’s now the world’s 10th-most valuable listed business, according to Bloomberg data. A trio of New York-listed Chinese electric-vehicle groups — Nio Inc., XPeng Inc. and Li Auto Inc. — are worth a combined $154 billion. None of the three is profitable and together they delivered fewer than 30,000 vehicles during the most recent quarter, just over 1% of Volkswagen’s car sales volumes.Arrival Ltd., a U.K.-based electric-bus and van startup that’s poised to go public by merging with a special purpose acquisition company, is valued at almost $16 billion after the SPAC’s shares more than doubled in a week. It won’t start producing vehicles until late next year.(1)The electric revolution is real and the shift away from combustion engines is accelerating. From a climate perspective, it’s great that investors are allocating capital like this. Still, valuations look mighty bubbly. The potential for disappointment is massive, particularly for the newest crop of EV makers that are yet to generate meaningful revenue.Like all financial bubbles, this one is driven by dreams of enormous wealth. Elon Musk has overtaken Bill Gates as the world’s second-richest person. Scottish investment manager Baillie Gifford & Co., an early Musk backer, recently cashed out billions of dollars in Tesla stock but retains a 3.7% holding worth about $20 billion. Baillie Gifford has more than one horse in the EV race: Its Nio stake is worth almost $6 billion. The Chinese company’s U.S-listed shares have surged 1,235% this year. Nio’s recent history shows the perils of electric-vehicle stocks. It warned in March of substantial doubt in its ability to continue as a going concern, having burned through $4 billion of cash in three years. It survived thanks to a local government bailout. Tesla has been on the cusp of bankruptcy at least twice since 2003. Those now joining the electric race claim to have learned lessons from these near-death struggles but there’s little to suggest their fates will be any less volatile.Competition is intense and while electric motors are simpler to build than combustion engines, developing a vehicle that’s safe, reliable and exciting is incredibly difficult. Incumbent giants such as Volkswagen and General Motors Co. are much better capitalized and they’ve far more experience managing supply chains and building brands. After a slow start, they’ve gone “all-in” on EVs. They won’t be shoved aside easily. Several factors have driven electric-vehicle stocks to these giddy heights. The U.S. Federal Reserve has stoked a speculative frenzy by cutting interest rates to zero, and bored millennials trading stocks at home on Robinhood have caught the EV bug. Electric-vehicle companies know how to market themselves to this crowd: Workhorse Group Inc. says its delivery vans can be paired with a drone, while XPeng emphasizes its autonomous-driving capabilities. ElectraMeccanica Vehicles Corp.’s “Solo” model has just three wheels.  Then there’s 2020’s hottest financial fad: SPACs. Many have merged with electric-vehicle groups, and one peculiarity of these deals is that the companies are allowed to publish detailed multi-year financial forecasts, unlike in a regular initial public offering. These projections are often extremely bullish. Like Arrival, Fisker Inc. — an asset-light electric-auto business whose shares have soared — is yet to commence commercial sales. Even Musk is worried about SPACs, though he hasn’t said which ones.These new companies claim to have a solution for the manufacturing difficulties and massive capital outlays that almost sank Tesla. Drawing a comparison with the way Apple Inc. outsources phone production to Foxconn Technology Group, Fisker plans to subcontract manufacturing of its Ocean SUV to Canadian auto-parts supplier Magna International Inc. Electric- and hydrogen-truck maker Nikola Corp. is pursuing a similar strategy with partners GM and CNH Industrial NV. Others are taking a different approach. Electric-pickup startup Lordstown Motors Corp. acquired a factory from GM and has licensed technology from Workhorse to speed its market entry. Not to be outdone, Arrival claims to have reinvented the car assembly line. It plans to construct smaller, cheaper “microfactories” situated closer to where products are sold. Greater automation will reduce the need for human labor, it says.However you produce vehicles, though, there’s plenty to trip you up. More than a third of Workhorse’s factory staff have had to down tools because of suspected coronavirus infections. Li Auto recalled all 10,000 electric SUVs produced before June, after it found a potential suspension problem. Workhorse and XPeng both warned recently of battery supply bottlenecks. A big test for wannabe Teslas will come when they’ve burned though their cash and need to ask equity and debt investors for more, as Tesla and Nio have done repeatedly. ElectraMeccanica warned in its latest accounts that its “ability to continue as a going concern will depend on our continued ability to raise capital on acceptable terms.”All of this may have short sellers licking their lips, but Tesla’s rise shows the danger of betting against the bubble. Nikola was the subject of a scathing report from Hindenburg Research that questioned its technology, and which forced the departure of its chairman. Yet its market capitalization now exceeds $11.5 billion.Diess may be right about carmakers becoming the most valuable companies. It’s inevitable, however, that some won't make it.(1) Basis of calculation: the transaction at $10 a share valued Arrival's equity at $6 billion. Shares of the CIIG Spac are now trading at $26.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Electric-Car Stocks Fall As China Signals Crackdown; Nikola-GM Doubts Grow
    Investor's Business Daily

    Electric-Car Stocks Fall As China Signals Crackdown; Nikola-GM Doubts Grow

    Electric-car stocks sold off on news of a probe in China, while Nikola failed to assuage investors on a proposed GM partnership.

  • 4 Top Stock Trades for Friday: NKLA, DE, NIO, CRSR

    4 Top Stock Trades for Friday: NKLA, DE, NIO, CRSR

    It was a quiet session on Wednesday, the last full day of trading this week. Remember, the stock market is closed on Thursday for Thanksgiving and only open for a partial session on Friday. Let’s look at a few top stock trades moving today.  Top Stock Trades for Tomorrow No. 1: Nikola (NKLA) Source: Chart courtesy of StockCharts.com Investors already know Nikola (NASDAQ:NKLA) is a volatile holding, but it has really been proving it over the past few sessions. Shares were up for eight straight sessions coming into Wednesday. While up nicely from the session lows, Nikola is still down over 10% at the time of this writing. InvestorPlace - Stock Market News, Stock Advice & Trading Tips From here, the road map is rather clear. We need to see shares hold $30, a notable level in its public trading thus far, as well as the 200-day moving average. Below those levels could put $25 in play, followed by the 50-day moving average. 7 of the Best Cheap Stocks for December On the upside, bulls need to see NKLA take out the 20-day moving average. That’s followed by this week’s high at $37.95 and the $40 mark.  Top Stock Trades for Tomorrow No. 2: Deere (DE) Source: Chart courtesy of StockCharts.com Deere (NYSE:DE) is dipping ever so slightly on earnings, down about 2% on the day.  Shares are now struggling to hold the 10-day moving average and the two-times range extension.  If the stock holds this area, look for Deere to retest the $266 area, which is near the all-time high and is current resistance. Above it could kickstart a move up toward the $300 mark, with the 261.8% extension coming into play at $301.46. If support fails to hold, it could open up a retest of former resistance near $240 and the 50-day moving average. Thus far, the latter has been a very solid support mark.  Deere has been a trustworthy long, but the divergence in the RSI (as it makes lower highs while the stock makes higher highs) is something to note. It doesn’t ruin the bullish setup necessarily, but again, it’s just something to keep an eye on for the shorter-term traders.  Top Stock Trades for Tomorrow No. 3: Nio (NIO) Source: Chart courtesy of StockCharts.com Nio (NYSE:NIO) has been one of the most robust names in the market this year as it relentlessly grinds higher.  As has been the case for a few months now, the stock continues to hold the 10-day moving average. However, bulls have to be feeling a little giddy here, which could create volatility.  I like this name so long as it’s above the 10-day and last week’s high near $50.60.  Falling below these marks could put the 20-day moving average in play. Ultimately, I would love to someday see a test of the $38 area, which should be support as long as Nio remains in good shape. Top Stock Trades for Tomorrow No. 4: Corsair Gaming (CRSR) Click to EnlargeSource: Chart courtesy of StockCharts.com Speaking of strength, have you seen Corsair Gaming (NASDAQ:CRSR)? Holy moly, this one has been on a run.  Perhaps the stock just blew off its top or maybe it makes new highs on Black Friday. It’s hard to know anymore with some of these stocks.  All I have to say is, be careful with it. Dip buyers will likely jump at the opportunity to buy CRSR on a test of the 10-day moving average. This mark hasn’t been tested in 11 sessions, so it’s bound to act like a magnet here.  Initially, that could be good for a bounce. If the stock knifes right through the 10-day though, CRSR may need some more time to reset. On the upside, reclaiming $46 could put $50-plus back on the table.  All in all, take care with CRSR. It’s a wild mover. And for that matter, take care with all your trading endeavors. Happy Holidays and good luck on your Black Friday and Cyber Monday shopping. On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.  More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner Radical New Battery Could Dismantle Oil Markets The post 4 Top Stock Trades for Friday: NKLA, DE, NIO, CRSR appeared first on InvestorPlace.