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Why Shares of Nikola Raced Higher on Thursday

By Scott Levine – Oct 7, 2021 at 11:18AM

Key Points

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A new partnership has investors excited.

What happened

With the close of yesterday's trading session, Nikola's (NKLA 9.62%) stock had fallen nearly 4% through the week. Investors, however, are taking a U-turn today, choosing to hitch a ride with the manufacturer of hydrogen fuel cell-powered trucks as the company announced a partnership with TC Energy (TRP -1.26%) to develop hydrogen production facilities.

As of 10:45 a.m. EDT, shares of Nikola are up 5.9%, having slightly retreated from their 7.5% gain earlier in the day.

A trading chart on a digital screen.

Image source: Getty Images.

So what

While Nikola continues driving toward its goal of putting hydrogen-powered trucks on the road, the company also sees an opportunity in developing hydrogen production facilities. According to today's announcement, Nikola and TC Energy will collaborate on developing and operating hydrogen infrastructure to provide fuel for its vehicles in the U.S. and Canada. Over the next five years, the two companies are targeting the development of a facilities capable of daily hydrogen production of 150 metric tons. And it's not only Nikola's vehicles that may run on the hydrogen it helps to produce; the two companies said they "will evaluate opportunities to optimize excess hub supplies to third parties under a joint marketing and services arrangement."

"This collaboration with TC Energy is intended to enable the production of hydrogen at quantities and costs that are required to support customer adoption and use of FCEVs [fuel cell electric vehicles]," Pablo Koziner, Nikola's president of energy and commercial, said in a statement. 

Now what

It's understandable why investors are excited about Nikola's new initiative since so other fuel cell companies, like Plug Power and Bloom Energy, have also expressed interest in expanding into hydrogen production. Those with a new interest in Nikola's stock, however, should recognize that despite the new collaboration, the company still has plenty of challenges ahead of it with executing this new growth opportunity. Consequently, only investors with a high threshold for risk should consider going along for a ride with Nikola at this point. 

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nikola Corporation Stock Quote
Nikola Corporation
NKLA
$2.85 (9.62%) $0.25
TC Energy Stock Quote
TC Energy
TRP
$43.22 (-1.26%) $0.55
Plug Power Stock Quote
Plug Power
PLUG
$15.81 (0.38%) $0.06
Bloom Energy Corp Stock Quote
Bloom Energy Corp
BE
$21.98 (2.14%) $0.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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