WSO Elite Modeling Package

  • 6 courses to mastery: Excel, Financial Statement, LBO, M&A, Valuation and DCF
  • Elite instructors from top BB investment banks and private equity megafunds
  • Includes Company DB + Video Library Access (1 year)

Comments (31)

Jun 10, 2020 - 12:33pm

I don't have a view on the company but I am noticing a lot of commentators saying they have "no IP" and intended to imply that there are low barriers to entry. That strikes me as a pretty arrogant and lazy comment. Whatever NKLA has, it's certainly something. If nothing else, at least a first mover advantage in a capital intensive area.

Fine to still be bearish for any number of reasons, but it seems to me some people are quick to dismiss the company without really giving it much thought.

Interesting topic, curious what others think.

Jun 10, 2020 - 3:08pm

The valuation is preposterous. No product, no manufacturing facility, no revenue, initial valuation at $3B and the thing is trading at a $24B market cap (for reference Fiat Chrysler is $18B, Ford is $28B). The former CEO and now chairman has frequently said they are vertically integrated, but that was quickly back tracked to say they are basically outsourcing everything. They say they have $10B of pre bookings, but anyone can go on their website and "pre order" 10 trucks with zero $ commitment (which I assume they are using for that calc). The technology they claim to have would be revolutionary, to the point that anyone with any degree of credibility has come out and said its foolish to think its real. Now of course this doesn't mean it's not legit, but there are a million red flags. I hope it's legit, but the research analyst in me ain't buyin it).

Most Helpful
Jun 10, 2020 - 3:15pm

Humorous read from yesterday's Matt Levine's Money Stuff. BMH = Boredom Market Hypothesis. Yesterday's issue was actually pretty good. I'd be interested to see the institutional vs retail share ownership.

"BMH: Nikola Tesla

When I formally introduced the boredom markets hypothesis last month, we talked about how retail traders loved Tesla Inc. even before the pandemic. The closer a company is to Tesla in its combination of social mission, high volatility, general drama and business of making cool toys, the more appealing it will be to bored retail traders. "There has to be more to investing than just Tesla," a trading YouTube star told Bloomberg. I wrote:

There has to be more to investing than just Tesla! You need a Netflix algorithm that is like "if you enjoy Tesla, here are some other funny stocks." It is a market opportunity; if you're weird and like rockets and Twitter, you should start a cannabis-and-laser-guns company and sell stock to people who enjoy Tesla but would like to get a little deeper into the genre. "I love how unfiltered Argon Dusk is on Twitter," your fans will say on r/wallstreetbets, "and how many '420' jokes he makes, and how he took a stand against outdated safety regulations when he launched his death-ray space station. I'm gonna buy lots of call options and you should too."

"Argon Dusk," you see, was a small tweak to the name of Elon Musk, Tesla's chief executive officer and social media manager. "People love Elon Musk and will rush to give their money to a slightly altered clone of him," was my thinking there.

I was so close:

No stock in the automotive sector is a better indication of equity-market exuberance than Nikola Corp.

The aspiring battery-electric and hydrogen fuel-cell truck maker debuted on the Nasdaq last week following a reverse merger with a blank-check company headed by a former General Motors Co. executive and board director. It's forecasting zero revenue for 2020 and its first $1 billion year won't be until 2023.

Ford Motor Co., by comparison, is expected to report about $115 billion of revenue for this year. And yet Nikola, whose stock more than doubled Monday, traded up another 30% to as high as $95 after the close, giving the company a richer market capitalization than the almost 117-year-old maker of the F-150.

Skeptics have long questioned the market's valuation of Tesla, which has yet to post an annual profit. But by pushing Nikola's market cap to $26 billion at Monday's close, investors have taken appraisals of zero-emission vehicle manufacturers named after a celebrated Serbian-American inventor to another stratosphere.

Not a small tweak to Musk's name, but a small tweak to Tesla's. Twenty-six billion dollars! The founder's stake is worth $9 billion. "As far as I can ascertain," tweeted my Bloomberg Opinion colleague John Authers, "Nikola Tesla didn't have a middle name," meaning that this particular trade might be tapped out, but just in case I am quitting my job to launch a company called Tessla Inc. "Electric tanks!," I will scrawl on the single piece of paper that makes up my S-1, just typing this joke here has made me a billionaire, modern stock markets are weird."

Go all the way

  • 9
Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
Jun 10, 2020 - 5:30pm

I bought into Nikola at $17 through VectoIQ and heres why:
- This is a clear cult stock. Anyone interested in innovative environmentally friendly companies will be interested. Therefore you have a large market of "investors" interested.
- You can bet that every sucker who sold Tesla under $400 is going to be buying Nikola. FOMO is a real thing.
- The country wants Nikola to be successful. We need alternatives to diesel and oil fueled cars. Our supply of oil is fixed and Nikola, like Tesla, is a solution to this big problem. As a result, you can bet that the US government will provide whatever help they can do this company. This can already be seen as they received PPP funding meant for small businesses.
- This is a fun stock as explained by Matt Levine's newletter titled "The Bad Stocks Are The Most Fun". People want to say they own Nikola. There's only so much things we can do WFH. Stocks are fun and Nikola is fun to follow. Don't fight it just join the ride and buckle up for a good time!

Array
  • Analyst 1 in IB - Ind
Jun 12, 2020 - 1:49pm

This is easily some of the worst reasoning I have ever read to back up why you should own a stock. Really hope you're not in ER.

Sep 29, 2020 - 12:56am

ArchBrand001

This didn't age well. You still "buckled up?"

When I first heard about Nikola the company a few years ago I thought it was some alternative name for Tesla, Inc. the car company, or maybe even that Tesla, Inc.'s real name was Nikola Tesla, Inc. or something. When I realized it was nothing more than a brazen attempt at surfing on the popularity of Tesla, Inc. I knew the company was a scam. I knew nothing else about Nikola other than that it was a fraud just because of its brazenness. Then when they had the audacity to sue Tesla(!) for design patent infringement it just confirmed to me what a fraud the company was. I remember as a kid seeing drawings of trucks with similar designs. As it turns out in Tesla's response to the Nikola lawsuit, Tesla found these designs going back to the 1990s (and maybe even the 1980s). Also, Trevor Milton always came off to me as...a swindler. Like, something seemed "off" about him. Even though his personality is very different than Adam Neumann's, Milton reminded me of Neumann, who I always thought was a con artist.

So knowing nothing of the business but being a huge EV AND hydrogen fan, I was tempted to buy Nikola stock, but remained out of it because it just felt..wrong. And I couldn't put my finger on it.

I still can't believe the stock is still trading at $19/share. But from what I understand, many of the major investors are locked-up until December, at which point it is hypothesized that the stock price will collapse. We shall see. Either way, it's another example of a con artist founder walking away with unbelievable wealth by creating a company that does nothing and loses money for investors. 

Oh yeah, and GM's board of directors needs to fire its CEO post haste. I can't believe what an incompetent move it was for GM to link its brand name to Nikola. What a terrible, inexcusable level of due diligence. I don't care how one-sided the deal was financially, you can't risk your brand name like that.

Array

Jun 11, 2020 - 2:30pm

Sometimes I think the haters of "cult stocks" are a bigger cult than the folks they're calling a cult.

Anti-TSLA crowd for example is some of the angriest buffoons I've ever seen. Not even saying they're wrong about the stock, but they act like having textbook finance knowledge ("ThE NuMbErS!!") is an excuse for not thinking creatively about the company's long term prospects.

NKLA starting to feel that way too. People frustrated that their Graham/Buffett investment toolkit doesn't work on a company like this, so they start calling it phony and lacking in substance . . no IP, no revenue, flimsy order book etc.

For those saying how can it be worth more than Ford or other automakers. First of all, EV is value not market cap. Second of all: https://www.motorbiscuit.com/both-ford-and-gm-could-be-bankrupt-in-15-w…

  • Prospect in IB-M&A
Jun 11, 2020 - 4:43pm

I really don't get where is the EV value. All major automakers (Daimler, FCA..) have proven that they where able to produce EV, they are just not scaling up the business because at the moment it is a niche mkt.

Obviously, in the future we are going to see an increase in sales of EV. However, TLSA doesn't have the first mover advantage any more, it is not the only company to have EV tech. I'am not a TSLA hater but I can see that it is overvalued. IMO cold shower incoming for TSLA lover

Jun 11, 2020 - 5:00pm

By EV I was referring to enterprise value. The automakers have much larger enterprise value than NKLA so when people say NKLA market cap is larger, it's really just proof of how distressed the automakers are.

As for TSLA, I have no view. Both the bulls and bears are cults if you ask me. I do think it's noteworthy that we've been hearing about an onslaught of competition for 4 years and it hasn't materialized to the degree bears say. The products exist but haven't been anywhere near as successful as Tesla.

Jun 12, 2020 - 12:18am
Prospect in IB-M&A:

I really don't get where is the EV value. All major automakers (Daimler, FCA..) have proven that they where able to produce EV, they are just not scaling up the business because at the moment it is a niche mkt.

Obviously, in the future we are going to see an increase in sales of EV. However, TLSA doesn't have the first mover advantage any more, it is not the only company to have EV tech. I'am not a TSLA hater but I can see that it is overvalued. IMO cold shower incoming for TSLA lover

I am not a shareholder nor have I ever taken the time to value TSLA but what the bears don't understand about TSLA is that it isn't about the first mover advantage. Their advantage is structural. The traditional distribution model for autos is to sell the vehicle at close to cost, very low margin, and make all your money on the parts and service. Well EVs have way fewer parts and require much less service. So if you are running a franchised dealer network distribution model (which TSLA is not but literally everyone else is), your franchisees have 0 incentive to push your EVs. So what do you do, mark up the price of your EVs to compensate for the lower profit over the life of the customer relationship? Well you can't because TSLA has priced the model 3 on par with IC competition now. This is why TSLA is eating everyone's lunch, it isn't about first mover tech advantage…even though TSLA's tech is considered to be superior to other EVs on the market right now. Not a TSLA investor or car owner, but there is more depth to the company as a LT investment than most people realize. I would break the habit of making statements like "I can see that it is overvalued" if you're basing that statement on multiples without having done the requisite fundamental work to make such a claim. Valuation comes last, after you understand what you are valuing, it can't be done meaningfully in a stock screen or price chart.

Jun 12, 2020 - 11:28am

These guys couldn't even come up with an original name.

Array

  • Director in IB - Gen
Sep 28, 2020 - 11:13pm

For what it's worth, the banker who led the Nikola SPAC is one of the least intelligent bankers I've ever come across.

  • 1
Sep 29, 2020 - 1:03am

There are a lot of really stupid smart people on Wall Street and in Silicon Valley. So this guy must have Jell-O mush for brains. 

Array

May 4, 2021 - 2:57pm

Analyst 2 in IB-M&A

I keep hearing from my bank's research team as well as others that Nikola (NKLA) is the next Amazon and will produce great returns, do people agree with this? and if so how much money should we all be putting into the stock on this pull back today?

Which bank do you work at? 

Start Discussion

Total Avg Compensation

June 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (35) $364
  • Associates (202) $234
  • 2nd Year Analyst (114) $151
  • Intern/Summer Associate (97) $145
  • 3rd+ Year Analyst (27) $145
  • 1st Year Analyst (419) $131
  • Intern/Summer Analyst (337) $82