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Don't Fall for the Nikola Rebound - Buy This Stock Instead
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Stocks: GM, NKLA, TSLA

Don't Fall for the Nikola Rebound - Buy This Stock Instead

By Andrew Keene, Special Contributor, Money Morning • September 23, 2020

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Nikola Corp. (NASDAQ: NKLA) saw its stock gain 3% yesterday - despite still being in the middle of a major fiasco.

As I told you last week, Nikola has been dealing with legal issues regarding a slew of fraud allegations. And while the company was thoroughly investigated and mostly cleared, the investigation's impact is still playing out.

The biggest loser happens to be Nikola's founder and chair, Trevor Milton. It was announced on Monday that the founder voluntarily resigned - 10 days after short-selling firm Hindenburg Research released a report claiming Nikola was an "intricate fraud."

Milton's resignation only further spooked already-shaken investors, and the stock plunged nearly 30% in pre-market trading on Monday. While Nikola had a backup plan already in place - including adding Stephen Girsky, former vice chair of General Motors Co. (NYSE: GM), and a member of Nikola's board as chair of the board, effective immediately - investors still piled selling pressure onto the stock.

Now, while Milton has stepped away, he's nowhere near done. Here's what the young founder had to say...

"I asked the Board of Directors to let me step aside from my roles as Executive Chairman and as member of Nikola Board of Directors. The focus should be on the company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors."

But regardless of whether Milton "clears his name" or not, Nikola is still in a tough spot. And it's going to be one that's hard for the company to bounce back from - especially as the stock continues to move down.

So, while the new low price tag on NKLA might seem attractive, I'm not going for it. There's a much better move you can make to keep your portfolio safe and profit from this scenario...

Nikola: Where's the Money?

You know the saying: Where there's smoke, there's fire. And I think it's essential to pay attention to the current "smoke" surrounding Nikola.

As I mentioned above, NKLA's low price tag - currently trading around $28 - may seem like a bargain deal to most investors, but I wouldn't get anywhere near it right now.

Following Trevor Milton's defense to the short-sellers, he voluntarily steps down as executive chair. Weird timing, right?

While I don't know the exact explanation for his sudden decision, I do find myself asking, why would a CEO step down if he has nothing to hide?

So, in my mind, it's a "smoke meet fire" situation. And there's no promise that Nikola's downward spiral is anywhere close to being over.

That's exactly why I won't be chasing this Nikola "discount" or getting close to the stock in general anytime soon. And my advice is that you shouldn't, either.

Instead, I would look to invest in the real winner of the electric vehicle sector - the stock that has remained on top all this time - Tesla Inc. (NASDAQ: TSLA). Plus, its recent split has made it a lot more affordable for investors. It's a definite win-win.

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Andrew KeeneAndrew Keene

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Browse Andrew's articles | View Andrew's research services

Andrew Keene is a globally known trader and a renowned expert on all things options.

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