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Why Nikola Stock Is Jumping This Week

Motley Fool - Fri Oct 25, 9:59AM CDT

Electric truck maker Nikola(NASDAQ: NKLA) continues to work to grow its business, and it announced some new progress this week. That led to a jump in the stock price. As of early Friday morning, Nikola shares were 10.5% above last Friday's closing price, according to data provided by S&P Global Market Intelligence.

However, that bump higher still didn't do much to offset the huge decline the stock has had this year. Nikola shares have dropped by about 84% year to date, even as the company begins to accelerate sales of its hydrogen fuel cell electric trucks.

New customer in a new region

Yet this week's news of an agreement between Nikola, global beverage company Diageo, and logistics provider DHL Supply Chain to deploy two new Nikola hydrogen trucks in Illinois is still notable progress for the electric truckmaker. DHL Supply Chain is a division of DHL Group, and a longtime logistics contract partner for Diageo's North American operations.

The two Nikola hydrogen fuel cell trucks joining the DHL Supply Chain fleet may not sound like enough to be impactful for the company or the stock. Nikola sold 72 new trucks to its wholesale distributors in the second quarter alone. But these two trucks represent its entry into a new geographic region. Nikola has mostly focused early sales on the West Coast, and near Southern California ports specifically. Its niche product requires hydrogen supply and fueling infrastructure, so holding to a contained market geography made sense.

Now it will have the first two hydrogen fuel cell trucks in service in the state of Illinois. It will also include a modular refueler on the Diageo campus in Plainfield, Illinois, the company said. So this deal is more meaningful to Nikola than it may look on the surface. And investors seemed to acknowledge that this week.

We should hear more about the company's expansion plans when it reports third-quarter results next week on Thursday, Oct. 31.

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Howard Smith has positions in Nikola. The Motley Fool recommends Diageo Plc. The Motley Fool has a disclosure policy.