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Why Nikola Dropped, Then Jumped Today

What happened

Shares of electric-truck maker Nikola (NASDAQ: NKLA) have had a bumpy last few days. Today's action mirrored recent movements as shares dropped 5%, then moved 4.4% above Monday's close, before finally settling back with a gain of 3% as of 10:40 a.m. EST.

So what

The volatility is partly left over from the previous days' news, and partly tied in with today's market sentiment.

Nikola Two (left) and Tre (right) semi trucks. Image source: Nikola.

Shares took a dive on Dec. 23 when the company announced it was backing out of an agreement to supply Republic Services 2,500 battery-electric garbage trucks.

But shares jumped yesterday after J.P. Morgan put out an analyst note that investors took as a positive view.

Now what

Many renewable energy stocks are taking a hit today, which explains the initial drop. But longer term, investors will have to decide whether Nikola can recover from the reputational hit it took earlier this year when a short-seller report forced founder and chairman Trevor Milton to resign.

The analyst report yesterday pointed out that the next year should be "less drama-filled" for the company. But it ultimately comes down to whether Nikola can successfully make both the battery- and hydrogen-electric trucks it claims. Expect plenty more volatility as investors digest news regarding the underlying business next year.

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Howard Smith owns shares of Nikola. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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