Nikola Stock Is a Fraud, But It’s Still the Next Tesla

Nikola (NASDAQ:NKLA) stock shareholders have been on a wild ride this week. On Tuesday, General Motors (NYSE:GM) announced a $2 billion equity investment in the electric truck maker, sending the stock shooting up 40%. Shares then slid 12% on Wednesday when short-seller Hindenburg Research accused the company of being "an ocean of lies." And on Friday, NKLA stock is down another 16%.Source: Stephanie L Sanchez / Shutterstock.com According to its research, founder Trevor Milton had been deceiving investors for years -- at one point rolling a truck down a hill to get footage as if it were driving on a flat road. So what should investors do? Well, I'll let you in on a little secret about the electric vehicle (EV) industry: It's always been built on a series of lies.Most startups are, and EVs are a particularly audacious case because of their intense capital requirements. While software companies might have to raise millions of dollars to create a marketable product, electric vehicle companies often have to raise billions. And that usually means bending the truth to get investor money.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Buyout Stocks With Long-Term Potential So if you're comfortable investing with hucksters, Nikola provides the best path to finding the next Tesla (NASDAQ:TSLA). Founder Trevor Milton will now take a backseat after GM's massive investment. But if the thought of enriching a self-serving founder makes your skin crawl, then there are other ways to make money. So how mercenary are you? Nikola Stock: A Startup's SinsReaders will know that I like the electric vehicle industry. Its potential is so compelling that oil market strategists have adjusted their expectations for decades out.However, most startups also need to fool investors just long enough to raise capital. Few might remember the charisma that Jeff Bezos showered on investors to get Amazon (NASDAQ:AMZN) off the ground. But he managed to list the company in 1997 just in time. Only two years later, in 1999, The Wall Street Journal ran "Amazon.bomb" across the front of its Barron's magazine. "Unfortunately for Bezos, Amazon is now entering a stage in which investors will be less willing to rely on his charisma and more demanding of answers" The Wall Street Journal wrote.Elon Musk worked the same issue at Tesla. "He's done amazing things, but at the same time, he's not a straight-shooter," said Darryl Siry, Tesla's former senior vice president for sales and marketing. "It's a reality distortion field and it's a powerful one. He gives the facts to fit the narrative he wants out there." From Startup to Grown UpToday, Nikola finds itself in a similar situation. The company has repeatedly claimed to have "battery-electric and hydrogen fuel-cell electric" technologies, a rather important component to any electric vehicle.But did the company actually have the technology? Probably not.In Tuesday's agreement with GM, Nikola revealed it would rely on GM's Ultium batttery system and Hydrotec fuel cell technology. These are fuel technologies that GM had developed for its 20 new EV models to release by 2023. So whether or not Nikola had the fuel technology becomes irrelevant.So why would GM agree to the deal? That's because GM will receive a much-needed marketing boost for its EV efforts. The legacy automaker already has the 2 position in electric vehicles after Tesla thanks to its understated Chevy Bolt. But marketing has always been an issue: the company sells just 5,000 Bolts a quarter.It's not often that a partnership benefits both sides. But here's a time it does. First-Mover AdvantageThe GM deal also gives Nikola a much-needed first-mover advantage in hydrogen fuel cells. And that could make Nikola the next Tesla. Whoever wins the hydrogen fuel cell wars will reap enormous benefits: more refueling stations means more vehicle sales, which leads to even more fuel cell stations. It's a virtuous cycle."This news is a huge shot in the arm for Nikola and cements credibility not just for its Badger production … but for its hydrogen fuel cell ambitions and semi truck vision going forward," Wedbush analyst Dan Ives said. "There have been many skeptics around Nikola and its founder Trevor Milton's ambitions over the coming years, which now get thrown out the window with stalwart GM making a major strategic bet." What's Nikola Stock Worth?Here's the tricky part. Nikola now has a $19 billion market cap with basically zero revenues. Even Tesla was selling 22,000 cars by the time it reached that valuation.But using some reasonable estimates starts to paint a better picture of what's at stake with Nikola stock valuation.To reach its current $50 value, Nikola would have to grow revenues to $24 billion by 2029, about the same growth rate as Tesla managed between 2010 and 2019. Tesla, however, built its own factories, which hampered its ability to grow. Nikola, on the other hand, will have GM's manufacturing heft at its disposal. If Nikola can instead grow to $30 billion revenues with an 18.3% EBITDA margin by 2029, its fair value jumps to $72, or a 43% upside. Can You Stand the Dishonesty?In June, Nikola's 38-year-old founder replaced himself with veteran COO Mark Russell. He's also been oddly busy cashing out of the company he founded, despite publicly telling investors otherwise.Good riddance, I say. * Missing copy for url 1. Please edit. * Url 1 is an external link. Please edit.Even startup founders need to draw the line on how far they're willing to deceive investors. But that's in the past. Now that Nikola is in far more trustworthy hands, it's time for GM and CEO Mark Russell to make the most of Nikola's "ocean of lies" and produce some gorgeous-looking trucks. Investors could yet win bigOn the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * America's 1 Stock Picker Reveals His Next 1,000% Winner * Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company * Radical New Battery Could Dismantle Oil Markets The post Nikola Stock Is a Fraud, But It's Still the Next Tesla appeared first on InvestorPlace.

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  Nikola calls short-seller report a 'hit job,' shares still fall

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  Nikola Shares Hit As Short Seller Claims EV Maker Is An ‘Intricate Fraud’

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3 Electric Vehicle Stocks to Buy Now Before They Surge

Investors curious to know which electric vehicle stocks to buy have an increasing number of options to choose from.Markets have certainly warmed up to the idea of electric vehicles, which was not the case several years ago. There are now many companies which are beginning to make waves in this space. Returns could be strong for many years as more and more consumers ditch ICE vehicles (those with internal combustion engines), and as EVs prove their worth. A few stocks of EV companies which are each doing very different things within the industry. This industry is all about potential and revolution. Fundamental strength will come later for these picks.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Sin Stocks to Buy Now as America ReopensSo, bearing that in mind, here are three electric vehicle stocks to buy that should appreciate, given their respective growth catalysts and not necessarily value. * Workhorse (NASDAQ:WKHS) * Tesla (NASDAQ:TSLA) * General Motors (NYSE:GM) Electric Vehicle Stocks to Buy: Workhorse (WKHS)Source: rblfmr / Shutterstock.com Workhorse stock rose on news that it has signed a deal with Hitachi (OTC:HTHIY). The agreement means Hitachi will provide an assessment of Workhorse's manufacturing, supply chain and increased production requirements. I wrote about the company in the past few weeks and I liked the company then. I thought it was a buy because its strategy is well thought out. The company is beginning to execute and there are a lot of ways for it to win. And despite Workhorse's tiny sales numbers, it looks like it has what it takes to win. Prior to that, I was previously bearish on them exactly because of their valuation relative to their paltry sales. The second time I looked into the stock, I realized that it is definitely in the right position. The company looks like it is going to get at least some of the U.S. Postal Service fleet revamp contract. And perhaps this latest deal with Hitachi is actually the initial stages of such a deal. However, that's nothing more than mere speculation on my part. Further, the press release does mention that this deal is related to C-Series van financing and mentions nothing of the Postal Service bid.All of this news, in tandem with the drone/van delivery combo, makes WKHS one of the best electric vehicle stocks to buy. Tesla (TSLA)Source: franz12 / Shutterstock.com A lot has been written about Tesla. And TSLA stock is overvalued. In a lot of ways markets could point to it and say that it exemplifies all that is wrong with today's stock market. Certainly, if Benjamin Graham were alive today, it'd be a stretch to imagine him investing in Tesla shares.But that's not the point. Tesla is the granddaddy of EV stocks. Its recent 5-for-1 forward stock split theoretically makes shares more accessible. In the upside-down stock market that investors currently live, this is a good thing. The inherent value of Tesla is unchanged. But investor psychology should be affected positively in the longer term. * 7 Sin Stocks to Buy Now as America ReopensTrue, Tesla shares are currently around $370, after dropping from $446 at the split. And maybe the markets are entering a period where investors calmly, rationally cool off the tech bubble EV valuations.However, the more likely scenario is that shares remain high-priced and Tesla continues to release models and do new things in vehicles that fundamentally change cars. That should start to bring more and more real value to the shares, and they'll increase in a more organic fashion. General Motors (GM)Source: Jonathan Weiss / Shutterstock.com General Motors is an EV play to consider. Not because of the Bolt or the Volt, or any other electric vehicle they may be developing. But rather because of a fundamental change they may take in regard to their stock and how it is organized. Currently, ICE vehicles and EVs play in the same sandbox at GM. Each contributes to the stocks underlying value. And that's quickly becoming something that may not make sense.One of the prime reasons Tesla stock is so high-priced while Ford (NYSE:F) is not, is simple: EVs. The market believes EVs are the future, while ICE vehicles are not. In a recent article on detroitnews.com GM CEO Mary Barra remained tight-lipped on the matter, stating:"We are evaluating and always evaluate many different scenarios, so I don't have anything further to say other than we are open to looking at and evaluate anything that we think is going to drive long-term shareholder value. So I would say nothing is off the table."GM is currently building a battery cell complex in tandem with LG Chem (USOTC:LGCLF) in Ohio. Valuations put the Ultium battery complex around $20 billion which, if spun off into a stock paired with GM vehicles, could draw in lots of capital in an IPO. On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * America's 1 Stock Picker Reveals His Next 1,000% Winner * Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company * Radical New Battery Could Dismantle Oil Markets The post 3 Electric Vehicle Stocks to Buy Now Before They Surge appeared first on InvestorPlace.

Why This Time Will Not Be Different for Nvidia Stock

In three sessions beginning last Thursday, Nvidia (NASDAQ:NVDA) stock lost 17% of its value. However, investors shouldn't panic.Source: JHVEPhoto / Shutterstock.com After all, we've been here before. It was just six months ago that the market as a whole was plunging. My advice then was simple: take the long view. In turn, investors who kept that focus, kept their cool and focused on high-quality stocks were rewarded.September hardly looks like March, but I'll admit the last few sessions have been nerve-wracking. The tech-heavy NASDAQ Composite dropped an even 10% over the same three trading days. As noted, NVDA stock has done even worse.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut Nvidia stock, too, has been here before. In the February/March selloff, it declined 38% in less than four weeks. By May, it had regained the losses -- and shortly after, reached new highs.An investor can go back to late 2018 as well. Fears of a "crypto hangover" and another market-wide rout led the stock to drop by more than half in less than three months. Investors did need some patience then, as it took NVDA more than a year to reach new highs. But any investor who bought the dip has done exceedingly well -- even if they were early. * 7 Sin Stocks to Buy Now as America Reopens That's already true in the early going, as both tech and Nvidia stock rallied on Wednesday. And looking forward, I simply don't believe this time will be any different. Overall, NVDA stock is a buy on the dip this time, just as it has been in the past. Valuation ConcernsThe primary driver of the recent selloff appears to be concerns about valuation in the markets -- particularly for 2020's gainers. From a broad standpoint, I'm somewhat sympathetic to those concerns.After all, we have seen a massive rally since March. The market's multi-year performance has been strong as well. Some investors are getting nervous, while others are looking to take profits.That sense of caution seems logical, but I'm not sure that it is. Just because the market offered a huge number of opportunities in March (and it did) doesn't, in turn, mean that stocks are overvalued in September.However, there's another important thing to keep in mind for both Nvidia and the market as a whole. The novel coronavirus pandemic is accelerating technological change. It's changing how we work, how we live, even how we get around -- and for the long term.NVDA stock is a play on so many of those trends. Increasing cloud growth? Check. Higher gaming demand? Check. Autonomous driving? Another check.It's not as if Nvidia stock has soared on no news. And it's not as if Nvidia stock is particularly expensive right now.Yes, the stock trades at 58x forward earnings. That seems like a big number, but it's not a huge number in the context of this market. Meanwhile, the Wall Street analysts -- on whose estimates forward earnings are based historically -- have underestimated Nvidia's earnings power. NVDA probably is cheaper than that single metric suggests.More importantly, valuation is not a reason to sell a quality stock. And there are few stocks of better quality than NVDA. (In fact, I don't see any in the chip space.)The company has years, and potentially decades, of growth in front of it. Thus, is 58x earnings really "expensive" in that context? Stick With NVDA StockAny investor with a long-term position in a stock is going to see near-term drawdowns. That's simply the nature of investing. Decades of history show that stocks generally rise over time -- and superior stocks provide impressive returns.But the gains aren't linear. Investors have to live through events like the coronavirus rout or the financial crisis, let alone minor corrections like we've seen during the past week or so.Good investors shut out the noise and focus on what works for their portfolio. And what generally works is owning quality names and, yes, paying a reasonable price.There's little debate at this point that Nvidia is a quality name. That said, what is making investors nervous right now is the valuation.However, that valuation is cheaper than it was last week -- and NVDA stock was a buy then, too. It's still a buy right now. This, too, shall pass.On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.Matthew McCall left Wall Street to actually help investors -- by getting them into the world's biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * America's 1 Stock Picker Reveals His Next 1,000% Winner * Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company * Radical New Battery Could Dismantle Oil Markets The post Why This Time Will Not Be Different for Nvidia Stock appeared first on InvestorPlace.