Shares of electric truck maker Nikola(NASDAQ: NKLA) had been on a roll over the last month, but those gains hit a wall today. The stock has rocketed more than 30% higher since early March, and that includes a big drop today.
After dropping as much as 16.5% Tuesday morning, Nikola shares were still lower by 4.5% as of 11:25 a.m. ET. Some of that decline came as many electric vehicle (EV) sector stocks traded lower. But a fresh lawsuit involving the company's former chairman also is likely weighing on the stock today.
EV demand worries
The big EV news today was a major disappointment from industry leader Tesla for its first-quarter deliveries. Tesla deliveries declined 8.5% year over year and badly missed average analyst estimates. Tesla competes with Nikola with its electric Semi trucks, but there's little overlap beyond that.
Nikola has also pivoted more toward supplying hydrogen fuel cell vehicles rather than its battery electric heavy trucks. Regardless, Tesla's miss has investors concerned that demand is waning more than many expected for EVs in general.
But the company-specific news from Nikola was a Securities and Exchange Commission (SEC) filing from yesterday in which it revealed it is still mired in legal conflict with its founder and former chairman, Trevor Milton. Milton was convicted last year on federal charges of securities fraud and wire fraud. But he is still vying to get some aspect of control over Nikola.
In its filing Nikola said that after agreeing to sell its Badger electric utility vehicle and powersports related assets, buyer EMBR has violated agreement terms by teaming up with Milton.
Milton has continued to try to obtain board seats with Nikola. Investors don't want to see Nikola spend needed capital on yet another lawsuit. With the electric vehicle demand picture also in question, investors don't want to deal with yet another distraction.
Should you invest $1,000 in Nikola right now?
Before you buy stock in Nikola, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nikola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 1, 2024
Howard Smith has positions in Nikola and Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
