Nikola Is Becoming a Savvy Hydrogen Economy Play

Investors in electric vehicle start-up Nikola (NASDAQ:NKLA) have experienced their fair share of ups and down. It’s been challenging to own NKLA stock, though some folks don’t mind the volatility.

Among the toughest moments was when Trevor Milton, the founder and former chairman, stepped down from Nikola in September. That event certainly didn’t boost the confidence of most NKLA stock holders.

Since Milton’s departure, it has felt like Nikola’s been struggling to re-establish its direction. This is reflected in the share price, which hasn’t had a sustained rally in a while.

In order to remain confident about Nikola, investors will want to keep in mind what makes the company special. In particular, Nikola’s commitment to clean energy is of paramount importance – and fortunately, a recent agreement underscores this commitment.

A Closer Look at NKLA Stock

Like many special purpose acquisition company (SPAC) stocks, NKLA stock once traded near the $10 level. That was back in early 2020, before the hype phase.

Once the buying frenzy started, it seemed like nothing could slow NKLA stock down. The stock peaked in June, with the NKLA share price topping out at a 52-week high of $93.99.

After that, NKLA stock effectively became the poster child of SPAC stock pop-and-drops. By Dec. 24, the share price had fallen to a painful short-term low point of $13.75.

As of Jan. 22, NKLA stock was trading at $20.12. So, there’s been some recovery, though the stock is far from its 2020 peak. Clearly, the bulls still have a lot of work to do.

A Positive Development

Last year’s downward trajectory for NKLA stock was, to a certain extent, precipitated by short sellers Hindenburg Research and Citron Research.

Those two analytic firms harshly criticized Nikola and might have damaged the company’s reputation. Suffice it to say that 2020’s second half was marked by drama, and it generally didn’t benefit Nikola’s stakeholders.

Yet, perhaps the year will be different. JP Morgan analyst Paul Coster predicted that in 2021, the news flow for Nikola will “be less drama-filled” and will “turn generally positive.”

At the very least, we can say with confidence that there was a positive development in January.

In particular, Nikola finalized a deal that will allow the company to receive affordable electricity so that Nikola can produce hydrogen for its planned fueling network.

To be more precise, Nikola secured an electric rate schedule with Arizona Public Service. This will hopefully solidify Nikola’s position as a notable developer of hydrogen-based fueling solutions for the transportation industry, particularly in Arizona.

A Significant Step Forward

This agreement might not sound like a game changer at first, but NKLA stock traders should consider the long-term implications.

In short, getting a competitive electric rate will help Nikola to achieve better cost-efficiency with the production, processing and dispensing of hydrogen.

With this, Nikola could help to enable “a zero-emission heavy-duty freight corridor along the I-10 freeway between Los Angeles and Phoenix,” according to the press release.

More generally, this could position Nikola as a leader in building Arizona’s emerging hydrogen economy. It’s a significant step forward in re-establishing trust with Nikola’s current and potential partners and clients.

Nikola President of Energy and Commercial Pablo Koziner further explained that the  “agreement sets an important precedent in showcasing that innovative operational solutions can be developed for the economic production of hydrogen that maximize benefits to all stakeholders.”

Presumably, Koziner is including NKLA stock holders in that statement. If so, then there may be some upside in store for the stock.

The Bottom Line

NKLA stock investors could certainly use some positive news as they’ve been through some tough times.

With the new electric rate agreement, Nikola can build itself up as a power player in the hydrogen economy. And with that, NKLA stock may be on its way to higher prices.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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