Why the Nikola stock could be one of the hottest things out there

While investors in Tesla's (Nasdaq: TSLA) shares pushed the accelerator pedal to the limit in 2020 and pushed the shares up by more than 250%, many others watched from the sidelines and wondered where the next share was for electric vehicles (EV). Many investors found these shares of Nikola (NASDAQ: NKLA) - a company that claims it sits on $ 10 billion in potential earnings. Just a few days after it started trading under its own ticker in June (after its merger with VectoIQ), Nikola stocks rose more than 135%. However, the momentum has slowed recently. The stock slipped into low gear last month and is down 49%. Does that mean Nikola was abandoned? Under no circumstance. As the company will report second quarter earnings on August 4, it is possible that some encouraging news could push stocks higher again. Of course, there are a few important things investors should know before getting on board with the EV newbie. patience is a virtue For investors driven to put Nikola from their watch lists onto their buy lists, it is critical that they realize that the company has not yet generated any significant revenue. In fact, it's the solar systems, not the EVs, that management has cited as the company's main source of income recently: $ 482,000 in 2019 and $ 173,000 in 2018. The company, which is fully committed to the development of both its battery EVs and its fuel cell EVs (FCEVs), does not plan to continue installing solar projects. However, investors shouldn't expect the company to produce anything noteworthy on the top tier before 2021 - 2021 at the earliest. To achieve this feat, Nikola has to implement his plan to start production of the Nikola Tre vehicles in Germany early next year and deliver them to customers later in the year. However, should those plans fail, earnings likely won't be seen until 2022. However, the bigger catalyst for the company is the completion of its manufacturing facility that will produce the Nikola Tre and Nikola Two in Arizona. Nikola expects the plant to start operating in 2023 and anticipates that it will have an annual production capacity of 35,000 units. Take a step back before believing the abundance of residue Management has certainly fueled investor enthusiasm for the company's potential by citing a $ 10 billion backlog in potential revenue based on 14,000 reservations for its FCEVs. However, investors should exercise some caution before believing the hype. For one, with construction underway in Arizona, it will be a few more years before the company - if the company stays on schedule - sees its EVs roll off the assembly line. On the other hand, the FCEV reservations are non-binding and do not require down payments, so that potential customers can leave them at any time. Given the increasing competition from other EV car manufacturers like Hyliion, which will soon go public due to its merger with Tortoise Acquisition (NYSE: SHLL), this seems like a real possibility. Hyliion has a hybrid electrical solution that is currently on the market, so those who want to do without conventional truck options don't have to wait for Nikola - or Tesla and its semi. In addition, the pressure that Hyliion represents will continue to increase as the company approaches series production of its Hypertruck ERX, which is expected to deliver series in 2022. Dealing with debt and dilution Potential investors also need to be aware of the fact that Nikola, who does not generate organic money, will need to raise capital - be it by issuing additional equity or debt, or both. The Arizona manufacturing facility requires a substantial $ 600 million capital investment, according to the company. Given that the company had $ 75.5 million in cash at the end of Q1 2020, the need to secure additional cash is a certainty.