Should You Buy the Dip in Nikola?
StockNews
Published Dec 03, 2021 01:08PM ET
Updated Dec 03, 2021 02:30PM ET
Should You Buy the Dip in Nikola?
Nikola’s (NKLA) stock has retreated more than 40% in price over the past year and is currently trading near its 52-week low. The company recently reported challenges due to the supply chain bottlenecks and high inflation. The recently enacted infrastructure act in the U.S. should boost the company’s operations. However, the new COVID-19 variant could be a major headwind. Given that the stock is currently trading at a lofty valuation, will it be profitable to buy its dip? Keep reading to learn our view.Nikola Corporation (NKLA), in Phoenix, Ariz., operates as a technology innovator and integrator that develops energy and transportation solutions in the United States. NKLA shares have slumped 46.1% in price over the past year and 35.3% year-to-date to close yesterday’s trading session at $9.88. The stock is currently trading below its 50-day and 200-day moving averages and near its 52-week low, which it hit on August 16.
The company is grappling with supply chain disruptions and cost pressures. Due to supply-chain bottlenecks and inflation, the cost of clean trucks is currently higher than diesel vehicles. "It's really a rotten time to have the costs go up," Nikola CEO Mark Russell complained. The rising prices are proving to be a severe headwind for a money-losing startup like NKLA. Furthermore, the company faces intense competition from well-capitalized truck manufacturers and rival newcomers. NKLA cut its financial outlook for the year in August.
The recently identified omicron COVID-19 variant has increased investors' anxiety. Investors' anxiety rose after the CEO of Moderna Inc. (NASDAQ:MRNA) voiced concerns over the effectiveness of current vaccines. Furthermore, if lockdowns are reinstated, it could severely hinder NKLA’s growth trajectory. Over the past five days, the stock has declined 5.5% in price.
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