Why Nikola Surged Over 25% at One Point Today

Shares of electric and hydrogen-fueled truck maker Nikola (NKLA +0.00%) rallied over 26% at one point today, before settling into a 16% gain as of 1:13 p.m. ET.

The rally was fueled by the company's disclosure of hydrogen truck deliveries for the second quarter, which greatly exceeded expectations. With Nikola's past problems and loss-making financials having beaten the stock down to very low levels, it's no wonder the good news sparked a reversal.

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OTC: NKLA

Nikola

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Key Data Points

72 hydrogen deliveries

In the second quarter, Nikola reported 72 HYLA Class 8 hydrogen-powered truck deliveries to wholesalers. That was well above the high end of 60 it had forecast for the quarter in its previous guidance. In addition, Nikola noted a new customer in Walmart Canada, which had purchased vehicles for the first time, while existing customers increased purchases through Nikola's dealer network.

The 72 deliveries almost double the first quarter's 40 and brought Nikola's total year-to-date deliveries to 112. Nikola CEO Steve Girsky said, "We are firmly on the field and are continuing to secure our first-mover advantage in zero-emissions Class 8 trucks in North America, as well as with our HYLA hydrogen refueling solutions."

It's good news for Nikola and the prospects for hydrogen-powered trucks. The long-haul trucking industry may be difficult to electrify due to weight concerns, but hydrogen is a zero-emissions fuel that produces only water as a byproduct. That being said, hydrogen does take energy to produce, so it's only a zero-emission fuel if produced with green energy.

Moreover, the retail price of hydrogen, according to a Nikola press release last month, is currently $32 per kg. That's high, far exceeding the cost to produce hydrogen. However, Nikola believes as more hydrogen trucks get on the road and infrastructure is developed, those costs will come down.

Nikola still has a lot to prove

Today's stock pop is somewhat encouraging, but can likely be attributed to short-covering, as 20% of Nikola's shares were sold short as of June 14. The company was also forced to execute a 1-for-30 reverse stock split last month, as its share price had fallen below $1 in violation of Nasdaq rules.

Fundamentally, the company burned through over $130 million in the first quarter alone, but only has about $345 million in unrestricted cash left on its balance sheet. That means Nikola needs to get more profitable fast or raise money in a high-interest environment. So despite today's rise, investors should wait until the dust clears and Nikola is on a sustainably profitable path before investing.