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Why Nikola Stock Is Moving Higher Today

By John Rosevear – Jan 11, 2022 at 6:38AM

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The company announced a small order, but there's a little more going on here.

What happened

Shares of electric heavy-truck start-up Nikola (NKLA 1.77%) were trading higher on Tuesday, after the company announced that Covenant Logistics Group (CVLG 0.60%) has signed a letter of intent to buy 50 of Nikola's electric semi trucks, if a test program goes well.

As of 11:15 a.m. ET today, Nikola's shares were up about 5.1% from Monday's closing price.

So what

Nikola said that Covenant Logistics, a long-haul trucking firm based in Chattanooga, Tennessee, has agreed to purchase 10 battery-electric (BEV) Tre semis, and 40 fuel-cell-powered (FCEV) Tres, once a demonstration program has been completed to both companies' satisfaction.

A Nikola Tre semi with a trailer, in Covenant Logistics livery.

Covenant Logistics has signaled its intent to buy 50 Nikola Tre electric semis, once a demonstration program has been completed successfully. Image source: Nikola.

Nikola said that it will deliver a BEV Tre and a mobile charging trailer to Covenant for testing in the second quarter. A FCEV Tre will follow next year, once production of the hydrogen-powered variants begins. 

That's a nice bit of news for Nikola, and it's likely why the stock is moving up today.  

Nikola is positioning the BEV Tre as a short-haul truck for metro and regional routes, as limiting the truck's range allows it to keep battery weight and recharging times relatively low. The FCEV Tre will have a range of up to 500 miles, Nikola has said, making it suitable for long-haul freight routes.

Now what

The Covenant deal itself isn't a huge one. I think the way to view it is that a major trucking-fleet operator is kicking Nikola's tires, testing both the company and its products to see if there's a longer-term fit for Covenant's fleet. 

What makes it interesting for Nikola investors is this: It's the fourth tire-kicking deal that Nikola has announced with major fleet operators since it made its first deliveries on Dec. 17. 

The company's shares have had a brutal ride since its founder was ousted amid scandal in 2020. But I think it's time for electric-vehicle investors to take a second look at Nikola. It's becoming clear that there's considerable industry interest in the Nikola Tre, and that certainly seems bullish. 

John Rosevear 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.

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