There are names that are immediately recognizable when it comes to electric vehicles. Everyone knows Tesla (NASDAQ:TSLA). Nikola (NASDAQ:NKLA) generated buzz this year with its Badger electric/hydrogen fuel cell pickup truck. What about Workhorse Group Inc (NASDAQ:WKHS) and WKHS stock?
That one may not ring a bell. It’s not a player in the consumer space (although it did once have plans for an electric pickup), but Workhorse is definitely on the radar of investors. After four years under the $5 ceiling, WKHS stock suddenly shot up in June, gaining 673% in the month.
Shares in the delivery and utility EV maker gave some of that back, but since July they have been trading at over $15. Given that WKHS was priced as low as $1.47 in March, the gain is even more impressive.
But what caused the dramatic rise in WKHS, and can the EV stock maintain this valuation. Might it even continue to make gains?
Why Did WKHS Stock Take Off?
The big question about Workhorse Group is why the company’s stock suddenly took off in June. Shares in the company hadn’t seen $5 since January 2017. It was a penny stock as recently as May 2019 before staging a recovery. It opened 2020 at $3.07, got pummeled in March – like virtually every other stock – and rallied to $2.63 by June 1. Then things got interesting.
WKHS shares started to gain, with the movement accelerating in mid-June. The stock closed at $20.91 on July 2.
There were five primary catalysts for the explosive growth of WKHS stock.
The first was the huge gains made by Tesla and Nikola stocks. With investors piling on the EV bandwagon, WKHS was caught in the wave. Adding to its surge, inexpensive WKHS stock was especially popular with Robinhood investors — Business Insider reported the number of Robinhood accounts that own shares in WKHS jumped 300%.
Workhorse is focused on the commercial side of the EV industry, supplying electric-powered delivery vehicles for last-mile use. And the USPS has been on a years-long process of planning how to replace its fleet of 163,000 delivery vehicles. In May, bidding was extended to July 14 because of the pandemic – and Workhorse was one of the four remaining contenders for the contract, which could be worth $6 billion.
As the month wound down, the company made two announcements that added to its momentum. First, it was added to the Russell 3000 Index. Then, on June 30, Workhorse announced it secured $70 million in funding from an institutional investor.
Workhorse and Prospects for Growth
On Aug. 10, Workhorse released its second-quarter earnings report. Sales for the quarter were $92,000 while operating expenses were $5.6 million. The quarterly loss was 12 cents per share, up from a loss of 10 cents per share a year ago. That’s why that $70 million in financing was so important. Workhorse noted that it had delivered two of its new C-1000 electric step vans to Ryder (NYSE:R), and received an order for 20 new C-1000s from Cincinnati-based eTrucks.
The company reaffirmed its production target of 300 to 400 vehicles for 2020, and its CEO noted:
“… after acquiring the requisite various state and federal approvals in recent months, we are now the only medium duty BEV OEM permitted and able to sell and deliver our vehicles in all 50 states, which should allow us to further distance ourselves as the first movers in the last-mile EV space.”
The Bottom Line
There’s no disputing the fact that Workhorse has potential. The question is whether it will be able to capitalize on it. In 2018, Workhorse partnered with UPS (NYSE:UPS) on delivery vans with hopes of replacing the delivery service’s fleet of gas and diesel-powered vehicles. A deal was signed to deliver 1,000 and 350 of those have reportedly been delivered and seen service. However, since then UPS has been mum about whether it will move forward.
The postal service contract – or being one of several winners – would be huge. However, as the company’s deals with UPS and Ryder have shown, an initial win doesn’t guarantee a quick payoff. Evaluation periods can stretch into years.
However, Workhorse has one more fallback. As part of a deal that saw it license technology from its W15 electric pickup truck, it owns a 10% stake in EV startup Lordstown Motors. And with Lordstown preparing to go public, that stake could be worth a lot. InvestorPlace contributor Mark R. Hake says it could end up being $420 million to $700 million.
Currently trading around $17, WKHS stock has potential for significant growth – especially if the company lands that lucrative USPS contract.
If you want in on this EV maker and missed out on the days when it was priced under $3, now might be the time to get on board before the current plateau ends and it takes off again.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015. As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
