Dear Reader,
Nikola Corporation, the company planning to produce zero-emissions automotive vehicles is currently valued at 7.38 billion USD. And Nikola Corporation used to be valued at more than 20 billion USD until recently.
As far as I am concerned, Nikola is not worth more than 1 billion USD currently. Nikola Corporation is currently just a story stock. All it has behind it is the promise it will start producing electric trucks in 2023 under a General Motors partnership. But designing and ultimately producing electric vehicles profitable is an extremely hard task, as Tesla has shown.
Nikola Corporation's stock price is apparently mainly driven by retail investors like Tesla's. Retail investors, especially people with technology background, are infatuated with electric vehicles and the future. There are of course car enthusiasts, as well. Electric mobility may well be the future, but the valuation multiples of Tesla are crazy. Nikola Corporation's valuation metrics are absurd. Nikola will make something like 100 000 USD in revenue in 2020 and it trades at 7.38 billion market capitalization. Only losses are recorded up till now.
We are most definitely in a bubble. Every stock that has a good story attached to it like electric mobility, plant meat, cryptocurrencies etc. basically explodes in value. Apparently too much money is chasing too few listed companies. I believe even after the recent fall the Nasdaq Composite is overvalued by 45%, while the S&P 500 and the Dow Jones Industrial Average are overvalued by 30%. However, the free liquidity coming from global central banks can prop up this virtually all assets, stocks, bonds, real estate bubble just a little bit longer.
Nikola Corporation is a glaring example of a bubble. You invest in future earnings, without having almost anything in the recent past to lean on. Only a promise. A pure speculation. Yes, if miraculously all works out perfectly and Nikola Corporation makes many multiples of the initial investment for its shareholders everything is fine. But I estimate the chances of such an event are no more than 6 %.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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