How to Buy Nikola Stock (NKLA)

Invest in Nikola stock today with Interactive Brokers as your trusted online brokerage.

Nikola Corporation (NKLA) has garnered significant attention in recent years as a contender in the electric vehicle and hydrogen fuel market. With new technologies and exciting ventures, the company has captured the interest of investors looking for the next big opportunity. 

Purchasing stock in Nikola could be a game-changer for your portfolio, but it's essential to approach this decision with careful consideration and preparation. From understanding the company's fundamentals to keeping an eye on market trends, knowing what to look for is crucial.

Whether you're a seasoned investor or a newcomer, this guide will break down the steps you need to follow to successfully buy Nikola stock, ensuring you're equipped with the knowledge to make smart investment choices.

How to Buy Nikola Stock

While you can purchase shares of Nikola stock like any other standard publicly traded security, you must first ask yourself if you can handle the volatility risks. True, NKLA is levered to the burgeoning and increasingly popular EV market, with a hydrogen fuel cell that appears to be rather efficient. However, that alone won’t support the equity unit’s trajectory.

Learn more about how to buy Nikola stock if you’re all in.

1. Pick a Brokerage

Thanks to the advancements in connectivity technologies along with growing consumer interest, you now have more choices than ever regarding online brokerages. From your traditional desktop-based platform to mobile trading apps, you can access whatever format among the best brokers works best for your needs.

Know that no online brokerage functions the same. Although rising competition has standardized some features (commission-free trading in particular) brokerages often differ on their accessibility to certain markets and investment vehicles like options trading.

2. Decide How Many Shares You Want

While investing quickly becomes a straightforward process, you should know that the stock market operates under a specific set of rules and terminology. For instance, you don’t transact deals on how much you pay in dollar terms — it’s based on share count.

The conversion is easy. Simply take the dollar amount you wish to spend and divide that by the current market price of the stock. For instance, if you wish to buy $1,000 of Nikola stock, you will be able to purchase 40 whole shares ($1,000/$24.43 = 40.933).

Keep in mind that while some online brokerages allow purchases of fractional shares, this is not an industry standard.

3. Choose Your Order Type

When you buy something from your local market, you pay the listed price (including tax if applicable). However, stocks in a stock market typically fluctuate in value, necessitating different order types to secure a transaction.

Bid

The bid is the highest price a buyer will pay for a stock and is always lower than the ask.

Ask

In contrast, the ask is the minimum price a seller will accept and is always higher than the bid.

Spread

The spread is the difference between the bid and ask price. To briefly summarize, investors (you) make money off the belief that shares will rise in value. Market makers make their money by the difference between their stock acquisition price and the price they sell the stock to you.

Limit Order

A limit order is a specific price you wish to buy or sell a stock. The benefit here is full transparency – the transaction will only go through under your set price. However, the disadvantage is that there is no guarantee this price will ever materialize.

Market Order

A market order is a request to buy or sell a stock at the next available price. The advantage is a virtual guarantee that your order will go through as long as it’s placed within the trading session. On the flip side, there’s no guarantee that it will execute at the most favorable price.

Stop-Loss Order

A stop-loss order is a safety valve for your portfolio. If you believe that your target stock will fall in value, you can set a specific price to exit your holdings. This way, you get something out of your investment rather than watching it plummet. However, if the stock price gaps down between sessions, you may end up selling your holdings at a far lower price than desired.

Stop-Limit Order

A stop-limit order helps prevent the nasty surprises that gap-down sessions can incur on stop-loss orders. Rather than selling outright when a stock falls below a specified price, a stop-limit order will only execute at the specified price and never below it. Therefore, if a bounce-back occurs following a steep gap-down session, a stop-limit order may trigger if the recovery rally reaches your price threshold. Of course, the disadvantage is that this price may not materialize.

4. Execute Your Trade 

Now that you know the basics of stock market transactions, it’s time to buy Nikola stock (assuming you understand the risks involved). The order type you use will largely depend on the market condition at the time and your desire to invest in NKLA.

For example, if Nikola stock is really moving, it’s possible that shares can fly above your limit order, never to dip down to your executable price again. In this case, you may prefer a market order.

Take care with speculative investments. If you’re on the more cautious end of the investing philosophy spectrum, you may want to opt for a limit order.

Best Online Stock Brokers

Whether you are a hands-on or hands-free investor will help determine which brokerage you should consider when looking at a stock offering. Remember, the ecosystem of energy solutions is vast, and the world of online brokers is just as robust, giving you the option to buy into any number of firms today.

Nikola Stock History

Nikola has experienced a tumultuous stock history since its initial public offering in June 2020. After going public via a merger with a special purpose acquisition company (SPAC), Nikola's shares initially surged to an all-time high of around $93 in June 2020. This spike was largely attributed to hype surrounding the electric vehicle industry and ambitious claims from the company's founder, Trevor Milton, about pioneering electric trucks and hydrogen fuel technology. The optimism in the market also stemmed from the burgeoning interest in green technology and sustainable transportation solutions spurred by the global shift toward reducing carbon emissions.

Nikola stock chart as of 8/21/24. Source: Trading View

However, the company's stock faced significant volatility following allegations of fraud levied against Milton in September 2020. A report by short-seller Hindenburg Research accused Nikola of misleading investors about the capabilities of its technology, claiming that the company staged a promotional video of a truck that was not operational at the time of filming. This news led to a rapid decline in share prices, with the stock plummeting to under $20 by early 2021. The fallout resulted in increased scrutiny from regulators, further eroding investor confidence and prompting class-action lawsuits, which contributed to the ongoing decline and volatility of Nikola's stock price.

Despite the challenges, Nikola's stock showed signs of recovery as the company continued to develop its products and establish partnerships within the industry. For example, in late 2021, news of collaborations with major industry players, such as European truck manufacturer Iveco, to produce electric trucks and install hydrogen stations revitalized interest in the company. By early 2022, investors were cautiously optimistic, providing some price increases as buyers sought to capitalize on potential future growth in the electric vehicle market.

Pros of Buying Nikola Stock

Take a look at other reasons you might want to dip in:

• Compelling product: Because of Nikola Badger’s futuristic but familiar design elements, it should appeal to buyers who are skeptical about electric vehicles.
• Potentially undervalued: Before the fraud allegations, Nikola stock traded hands at nearly $80 at its peak. A move back to that price level would net a handsome reward for speculators today.
• The power of the internet: Social media has now become an unignorable catalyst on Wall Street and its penchant for lifting out-of-favor stocks could help Nikola escape from the doldrums.

Cons of Buying Nikola Stock

Trust plays a crucial role in whether people will participate in the stock market. The stock price on this auto maker is highly dependent on variables that could cause problems for investors. On that note, check out some reasons you may want to steer clear of Nikola:

• Fraud, fraud, fraud: Sadly, the allegations surrounding Nikola stock imply substantial confusion as to what part of the underlying business, if any, are actually viable. Not surprisingly, it’s hard to trust a company when the CEO resigned under fraud allegations. This is something to keep in mind before getting involved with Nikola stock.
• No more low-hanging fruit: Due to the enormous success of Tesla and other EV manufacturers, the low-hanging fruit in this market is gone. You’ve got to produce the goods and that’s a huge question mark hanging over Nikola.
• Short-squeeze limitations: While you can’t ignore social media nowadays, you also don’t want to bank on it too much. Eventually, even the most ardent bulls will have to sell shares to take home their profits.
• Hydrogen production: Hydrogen fuel production will continue to be an issue in the market because it can be difficult to capture hydrogen and store it for production in these vehicles or traditional hydrogen vehicles that may become more popular in the future.

A Hot Trade: Too Hot for You?

Prior to the fraud allegations, Nikola stock represented a very tempting offer. Because the underlying company competed on a fresh segment (electric pickup trucks) and due to its bold and universally appealing design, NKLA drew much early investor sentiment.

However, fundamentals matter and so does fraud. As academic research and common sense imply, it’s difficult to earn trust once it has been broken. Further, while the frenzy surrounding out-of-favor stocks can help lift Nikola, emotions alone have never been a reliable tailwind.

You can make profits with Nikola stock, but you should know when it’s time to hit the brakes. This truck maker can make waves in the commercial vehicle market, but can a battery pack and a high offering price help you buy into the electrification of commercial fleets?

Frequently Asked Questions