Forget Nikola and Invest Your Money Here Instead

Nikola has not had a very good year and new reports are even more worrisome. You should avoid it and invest in a better company like Ford instead.

Oct. 3, 2020

Nikola’s (NASDAQ: NKLA) manufacturing and battery deal with General Motors (GM) is in trouble due to allegations leveled by Hindenburg Research of investor fraud and deception by CEO Trevor Milton, who resigned last week as a result. Shortly thereafter, Milton was accused of sexual harassment by two women who were fifteen at the time of the alleged events. Nikola is a vaporware company with zero products and zero revenue that has relied on a powerful hype machine in Milton to drive its stock price to nearly $80 in June, with recent events just rubbing more salt on the wound. Avoid it like the plague and have a look at Ford Motor Company (NYSE: F) in its stead.

Why Ford?

Ford Motor Company was founded by Henry Ford in 1903 and soon thereafter, he employed the assembly line paradigm of manufacturing and reduced automobile construction time six-fold. The company is the second-largest automaker in the U.S. — behind GM — with a 14% market share, and has joint-ventures in Brazil, the UK, China, Taiwan, Thailand, Turkey, and Russia. Ford has had the best-selling pickup trucks in the U.S. in its F-Series line for the last 43 years.

As Tesla (NASDAQ: TSLA) has demonstrated, the future of the automobile is electric and Ford will premiere its first all-electric vehicle (EV) later this year with its Mustang Mach-E and plans to unleash its electric pickup F-150 in 2022, with a hybrid model launching in 2021. Ford’s interest in future-tech doesn’t stop with electric and hybrid vehicles as it is invested in automated vehicles (AV) as well. In 2017, the company took a 40% stake in Argo AI to develop self-driving vehicles by 2022 — delayed by about a year thanks to the pandemic. The benefits of AV include greater safety, efficiency, and productivity, and the market is expected to be worth $60 billion by 2030.

Ford’s F-Series sales generated nearly $42 billion in revenue for the company last year and rank near the iPhone as one of the biggest consumer products in the U.S. This product line also provides a nice boost to the U.S. economy as it contributes $49 billion a year to the country’s GDP and supports nearly half a million jobs, according to a study conducted by Boston Consulting Group. With the introduction of the hybrid and electric lines of the F-150, these numbers are sure to grow as consumers will embrace a gas-free vehicle for both financial and environmental reasons.

What about the pandemic?

Ford has undertaken a massive cost-cutting operation in 2018 to target $25.5 billion by 2022; it’s doing this by simplifying its product line. Additionally, the company is investing $11 billion in EV development which will serve it well not only in the U.S. but in its China market as well, the largest EV market in the world. As of Q2, the company has over $57 billion cash on hand, a 50% increase year-over-year (YoY).

Ford also makes money from its Ford Credit division, which contributed over 14% to the company’s revenue in the last quarter. In fact, the segment had closed out 2019 with its highest earnings in 9 years: $3 billion before taxes. Along with the company’s cash, Ford Credit serves as a pillar for the company against pandemic-related headwinds.

If you want to ride the electric and autonomous vehicle train, you’d be better off investing in a solid company like Ford rather than a flash-in-the-pan organization like Nikola.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.