Could Nikola Stock Become the Next Tesla?

red and green electric and gas cars

Nikola (NKLA) is the newest electric vehicle company, and Wall Street already values it as much as Ford. Could NKLA stock be another Tesla? That’s another story.

It wasn’t long ago that investors got their first look at the Tesla Cybertruck, a cross between a DeLorean and a Mad Max off-road vehicle. The company has already received more than 500,000 reservations, and if all goes well, production will start late next year.

Tesla Cybertruck

And now a certain segment of the investing world is excited by Nikola stock, and the prospect of the Nikola Badger, a somewhat more conventional pickup truck that would also run on electricity.

Nikola Badger

The Nikola Badger is part of what's been driving Nikola stock.

Both companies take their name from Nikola Tesla, the brilliant Serbian-American inventor, so in one way, it’s as if a company that wanted to compete with the iconic Ford F-150 called itself Henry—but I digress.

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The main difference between the two electric trucks, aside from appearances, is that the Badger (if it ever gets built) will have greater flexibility as to the source of its electricity.

Option A would be the plug-in Badger, with performance figures comparable to the Tesla Cybertruck—906 horsepower and a 0-60 mph time of 2.9 seconds.

Option B would add a hydrogen fuel cell, so that in addition to the 300-mile range of the battery, the Badger would have an additional 300 miles of range from hydrogen. Progress in hydrogen-fueled vehicles was led by Toyota and Daimler in recent decades, though both companies (in my opinion) were so tied to their fossil-fuel business that they were never able to commit to hydrogen. So I like the fact that Nikola (NKLA)—which has no such baggage—has seized the baton.

Today it’s difficult for drivers to find hydrogen outside of southern California, but if Nikola achieves its goal, users would eventually (perhaps by 2028) be able to access a “massive” network of 700 hydrogen refueling stations across the U.S.

(For comparison, Tesla (TSLA), globally, has 1,870 Supercharger stations with 16,685 Superchargers—with more being added all the time.)

Right now, Nikola has no truck and no manufacturing facility (it’s looking for a partner), so success is far from assured. But that didn’t stop investors from goosing the stock earlier this week as Nikola came public (via a reverse merger) and the company announced that pre-orders for the Badger pickup truck would begin next Monday, June 29.

Here’s the chart for Nikola stock.

Nikola stock has been on a tear for two months.Until early June, this chart belonged to VectoIQ, an acquisition firm created by a former GM executive. You can see the bump in March when the reverse merger was first announced, and then another bump in May, perhaps as an institution got serious, and then this month’s surge, following the completion of the reverse merger and the beginning of trading under the Nikola name.

So what comes next?

Short term, the stock is likely to fall back at least a bit; this last surge reeks of buying by unsophisticated retail investors who will bail out as gravity takes hold of the stock and they come to realize how far behind Nikola is from the “real” Tesla.

Is Nikola Stock the Next Tesla?

Unlikely.

While Nikola CEO Trevor Milton has a string of business successes behind him, and is likely to succeed with Nikola as well, the company is going after a very different market than Tesla and charting a very different route to serving it.

Batteries are the common factor. After that, almost everything is different.

Tesla likes to own everything, from its battery plant to its manufacturing plant to its sales and service departments.

Nikola plans to outsource almost everything, partnering with established companies in the industry for production, sales and service.

Tesla’s CEO Elon Musk is a maverick visionary who makes headlines for his unconventional behavior.

Nikola CEO Trevor Milton has worked within the system his whole life and is a member of The Church of Jesus Christ of Latter-Day Saints.

Tesla’s bread-and-butter is vehicles that carry people: today the Model 3—tomorrow the robo-taxi.

Nikola’s bread-and-butter will likely be trucks, beginning with a semi.

Nikola Semi

Semi trucks are the most logical first users of a hydrogen-fuel network, as they adhere to regular highway routes. And battery-hydrogen semis promise great torque and acceleration, regenerative braking, and greater efficiency than today’s diesel engines.

Nikola Semi

The range of the Nikola Semi would be 500-750 miles and the vehicle could be refueled in 10-15 minutes—assuming those hydrogen refueling stations get built. It’s a bit of a chicken-and-egg problem.

But in the long run, there’s no question that electric motors will eventually supplant dirty and noisy diesel engines in trucks, and Nikola has a chance to be the leading provider of these trucks.

Tesla Semi

But that doesn’t mean Tesla is going to let it happen without a fight!

Tesla Semi

The Tesla Semi (all battery power, no hydrogen) was announced back in 2017 and it’s already real. Several have been in use by the company on the route between its Nevada and California factories for over a year.

The Semi hasn’t entered commercial production yet, though this month’s headline-getting action by NKLA seems to have lit a fire under Musk. A memo he sent employees a couple weeks ago said, “It’s time to go all out and bring the Tesla Semi to volume production. It’s been in limited production so far, which has allowed us to improve many aspects of the design.”

Historical Precedent

I recently read the book “The Last Days of Night,” which recounts the business rivalries between Thomas Edison, George Westinghouse and Nikola Tesla at the tail end of the 19th century as they worked to refine and commercialize electric light.

To simplify, Tesla was a brilliant but socially inept visionary, and Westinghouse was a good inventor, but Edison was the superior businessman, and for that reason alone, Americans commonly believe that “Edison invented the light bulb.”

Edison had his century of fame, but today the most highly valued name of the three is Nikola Tesla’s, with TSLA’s market capitalization $185 billion and NKLA’s market capitalization $26 billion, higher than that of Ford (F), a fact that is rather amazing by itself.

Bottom Line on Nikola Stock

I think NKLA stock is too high today and very likely to enter into a long correction as management tackles the hard work of building a vehicle company that can turn a profit—but I’ll be keeping an eye on it.

As for TSLA, I continue to expect great progress on many fronts as the company leads the world’s transition to sustainable energy.

Timothy Lutts

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*This post has been updated from an original version.

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