Tesla and Nikola Stock Have Been on Fire. A California Law Could Drive More Gains. - MarketWatch skip to content

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A California Truck Law Is Bullish for Nikola and Tesla Stock. Here’s Why.

Courtesy Nikola

A California law passed recently will benefit the electric vehicle sector, and could further drive enthusiasm for stocks such as Nikola and Tesla, as well as alternative fuel companies.

California passed the Advanced Clean Trucks rule in late June. It requires heavy duty pickup trucks to be zero-emission vehicles. The rule will be phased in from 2024 through 2035.

The market seemed to take little notice on the day the law passed, June 25—when both the Dow Jones Industrial Average and S&P 500 sold off by more than 2%. But Cowen analyst Jeffrey Osborne said a research report last week that he received higher call volume from investors about the electric-vehicle trucking space after its passage—a potentially good sign for the industry.

The law might be bullish for Plug Power (ticker: PLUG), Ballard Power Systems (BLDP), Workhorse (WKHS), Nikola (NKLA), Tortoise Acquisition (SHLL) and, of course, Tesla (TSLA).

Plug, Ballard, and Nikola offer fuel-cell technologies. Nikola also plans to sell battery-powered trucks. Tesla, Tortoise—via its pending acquisition of Hyliion—and Workhorse plans to sell battery-powered commercial vehicles.

It’s difficult to tell how much impact the bill’s passage has had on EV stocks, because other factors have been in play in the past week. Tesla is up more than 20% since passage, but its shares are more driven by cars than trucks. Last week on Thursday, Tesla reported better-than-expected second-quarter vehicle deliveries, pushing shares 8% higher to a record of more than $1,200 a share.

Workhorse stock is up an unreal 148% since passage around June 25. But Lordstown Motor, in which Workhorse has a 10% stake, launched its light pickup truck—called Endurance—to much fanfare this past week.

Tortoise stock has soared 59% over the same span, and Plug Power stock has climbed 25%. Ballard has jumped about 24%. The runs have been remarkable.

Nikola shares, on the other hand, are down 16% since June 25, including a 13% drop Thursday. Nikola opened up reservations for its Badger light-duty pickup on Monday. That isn’t bad news, but investors might have wanted more information about how reservations were going.

Nikola founder Trevor Milton did tweet on Thursday that the “$5,000 deposit package” was sold out. Reservations amounts range from $250 to $5,000.

Still, Nikola shares are doing just fine lately, up more than 70% since beginning life as a public company on June 3.

Whatever the reason for the huge rally, there is no denying alternative fuel stocks are on fire.

To be sure, there are risks. Workhorse, Nikola and Hyliion, for instance, don’t have substantial sales or a long history of manufacturing excellence. But that obviously just isn’t worrying investors right now.

Write to Al Root at allen.root@dowjones.com