Key Points
After announcing two large deals for hydrogen fuel cell vehicles, shares of Nikola (NASDAQ: NKLA) surged 60.87% yesterday.
Short interest in NKLA has been increasing, with nearly 129 million shares sold short as of June 30.
Investors should exercise caution when considering Nikola as an investment, as the recent surge appears to be driven by speculative trading rather than solid investment fundamentals.
5 stocks that are better options than Nikola
Shares of Nikola have skyrocketed after the company revealed two major deals for its hydrogen fuel cell vehicles. Following the positive news, NKLA shares rose 60.87% yesterday and are now in positive territory for the year, up nearly 3%. Over the past month, the stock has gained over 100% due to positive catalysts and the growing short interest.
Nikola Announces Two Major Deals
The First Deal: Nikola’s HYLA division, which focuses on hydrogen distribution and dispensing solutions for commercial trucking applications, has entered into a supply agreement with BayoTech, a small-scale hydrogen producer.
Under the agreement, BayoTech will purchase 50 Nikola Class 8 hydrogen fuel cell trucks within the next five years. The first batch of twelve trucks will be delivered between 2023 and 2024. Additionally, Nikola will acquire up to 10 of BayoTech’s HyFill hydrogen transport trailers, which are crucial for transporting high-pressure hydrogen from production sites to refueling stations.
The Second Deal: During Bosch’s Tech Day 2023 event in Stuttgart, the supplier announced that it will start large-scale production of its fuel-cell power modules. As part of this initiative, Bosch has chosen Nikola as its pilot customer.
The fuel cells manufactured by Bosch will be integrated into Nikola’s Class 8 truck, which is scheduled to be delivered to customers in North America starting in the third quarter of this year.
Growing Short Interest Driving the Surge
Short interest in NKLA has been significantly increasing month over month. As of June 30, nearly 129 million shares were sold short, up from 115 million on June 15. It is expected that this figure will rise even further when the latest short data is released.
With a substantial surge in trading volume and significant momentum in the stock, the growing short interest appears to be a clear catalyst for higher prices. However, this surge may be short-lived due to the imbalance between supply and demand caused by the increase in buying pressure from short sellers closing their positions.
Should You Invest in NKLA?
Investors should exercise caution when considering an investment in Nikola. The company’s cash burn remains a concern, as it has a modest cash balance and limited insider buying activity over the past twelve months. The recent rally in Nikola’s stock seems to be driven by speculative trading rather than solid investment fundamentals. Therefore, NKLA appears to be more of a trading vehicle than an investment option. While Nikola currently holds a “Hold” rating among analysts, there are five other stocks that top-rated analysts believe are better choices.
