It has been a rough year for hydrogen electric vehicle (EV) company Nikola (NASDAQ:NKLA). Despite a rally in the overall clean energy sector, NKLA stock went from $2.22 per share at the start of the year to as low as 52 cents in June. Since that low, Nikola has rebounded to the $1.30 level, where it currently sits as of this writing.
That said, the NKLA stock price has been volatile, with shares down about 8% today. But today’s price action in the markets has been ugly as well. Namely, a strong jobs report is boosting expectations for more rate hikes, hitting higher-risk equities hard as a result.
Additionally, this downside move today follows a period of significant positive momentum for Nikola shareholders and should be kept in context. The reasons for this rise vary. But in general, investors appear to be focused on two key positive catalysts for the company.
First, the company has waved the white flag on its Romeo Power deal. The deal, which transfers all of Romeo’s assets to an entity controlled by creditors, rids the company of the loss-producing and debt-ridden business. Accordingly, investors appear to like the balance sheet simplification that this agreement provides.
Second, Nikola has reportedly landed $42 million in grants from California to build heavy-duty hydrogen truck stations.
Let’s dive into what investors may want to make of Nikola following this recent volatility.
Will NKLA Stock Get a Big Boost From This Grant?
Any time a state or local government invests a large sum of money in a particular company, investors should take notice.
Of course, $42 million won’t likely be a difference-maker one way or the other for Nikola. The company is still burning through lots of cash and, while this infusion will help, investors have longer-term worries with respect to the company’s viability.
That said, the fact that the California Transportation Commission (CTC) is on board with rolling out hydrogen fueling stations for trucks is a big deal. The state’s goal of supporting Nikola’s hydrogen fuel cell truck launch in July is notable — and provides investors with some assurance that this rollout may be successful.
For hydrogen-powered vehicles to really become part of the transportation ecosystem, more infrastructure needs to be built. Thus, this investment is a positive signal to NKLA stock shareholders that the government is behind the firm’s green energy efforts.
Personally, I think that these are significant catalysts for Nikola and that the stock shouldn’t be down 8% today. Of course, NKLA is a risky option for investors looking to put capital to work for a greener future. However, it’s becoming more and more clear that Nikola’s technology is gaining more supporters. It could see wider-spread adoption than previously thought.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
