What happened
Shares of Nikola Corp. (NKLA 7.23%) rocketed as much as 36% higher this week, according to data provided by S&P Global Market Intelligence. The hydrogen fuel cell transportation company went into commercial production for its semitrucks after years of delays. Shares closed up 25.6% this week but are still down 98% from all-time highs.
So what
Nikola was a 2020 horror story. The company went public through a special purpose acquisition company (SPAC) and saw its stock shoot up more than 600% due to its charismatic founder and the market narrative around clean energy stocks. Then, a short seller exposed that its founder, Trevor Milton, had faked its product videos, rolling a truck down a hill while claiming it was operational. Shares of the stock collapsed after, destroying the majority of capital that investors put into the stock.
Today, with Milton gone, a new management team has taken over and is trying to bring Nikola's hydrogen fuel trucking concepts to market. This week, they hit a big milestone by getting its semitruck concept into commercial production. After years of work, it looks like the company might finally start selling some products. Investors took this news positively and bid up shares of Nikola stock this week.
According to the company, it has received 223 orders from commercial customers wanting to buy these hydrogen fuel trucks. This is only a tiny fraction of the 4 million semitrucks in the United States today, but you have to start somewhere.
Now what
Unlike most companies in the transportation space, Nikola is focused on not only making electric vehicle trucks but also hydrogen-powered vehicles. It was already producing electric vehicles for customers but now has a second product line coming to market. The problem is that it needs to get much bigger if it is ever to achieve profitability.
Just 76 trucks were shipped to customers in the second quarter of this year, leading to total revenue of $26 million for the period. Gross profit was negative $50 million, and its operating loss was $285 million. That means the company had an operating margin of negative 1,100%. Not good. This is a huge hole that Nikola's management needs to build out of, which is going to take many years. Just getting its hydrogen fuel trucks into production doesn't do much to solve this issue. Even though the stock is up, investors would be smart to stay far away from Nikola stock.
