Workhorse Group (NASDAQ:WKHS) stock has a lot to prove before investors should consider a purchase.
While the Cincinnati based company attempts to carve out a corner of the EV market, it faces high hurdles. Workhorse is currently gaining attention for its delivery van and drone combo.
The company has two ‘C-Series’ electric step vans, the C-650 and the C-1000. The numbers 650 and 1000 denote the cubic footage of cargo space in each respective vehicle.
The drone that pairs with the delivery van is called the Horsefly. Investors may also remember Workhorse’s plans for a pickup truck. Workhorse discontinued plans for that vehicle in March. The truck was called the W-15. Thus, Workhorse is moving forward and hedging its bets on its ability to succeed with the van and drone solution.
Let’s look at the barriers it’s facing, and what signals investors might watch out for to catalyze a purchase.
WKHS Stock Is Bolstered by Modest Sales
Sales ultimately drive everything in business. Workhorse however, being an upstart, growth company cannot be expected to have massive sales just yet. Investors are purchasing WKHS’ potential and betting on its ability to be a first-mover in EV delivery.
Nevertheless, those investors do need to know what sales really look like.
Workhorse’s Q1 results were not exactly stellar either absolutely or relatively. From an absolute standpoint, Workhorse made $84,000 of sales in the first quarter. Investors could be taken aback by such a small number. In Q1 of 2019 Workhorse managed to make $364,000 of sales: relatively worse. However, Workhorse has stated that it expects to deliver between 300-400 vehicles by year’s end.
Workhorse’s ability to secure contracts and deliver thereon is what will really define its success or failure.
Ryder Contract
About two weeks ago Workhorse announced a contract with Ryder (NYSE:R).
As per Workhorse CEO Duane Hughes:
“Ryder is a strong leader in offering unique, ground-breaking solutions for electric vehicle operations. We have delivered their first two C-1000s and are very excited to partner with them in offering our electric C-Series vehicles to their customers across the country. We are confident that we will be seeing new orders soon once their customers see the revolutionary nature of our products are and how accessible they are through Ryder.”
Investors should note that this is a cooperative project in conjunction with Ryder’s fleet management team. Customers have expressed interest in Workhorse vehicles, but nothing has been proven yet. Further, one important detail here is that Workhorse delivered only two C-1000 vans to Ryder so far.
None of this is to cast aspersion on Workhorse. Rather, the point is that this is essentially a small scale, pilot-project. Investors keen to gamble on Workhorse shares though should search for further information about this as the project gets underway. Perhaps it will lead to a scaling up for Workhorse, perhaps not.
USPS Fleet Upgrade Contract
This is where potential Workhorse investors should really pay special attention. The U.S. Postal Service is upgrading its aging fleet. Workhorse is one of four remaining potential suppliers to replace the fleet vehicles.
The deadline for proposal submissions passed on July 14. There hasn’t been any news from Workhorse regarding the process. But should Workhorse win the contract which calls for 75% of the USPS’ fleet to be EVs, shares will benefit greatly.
That said, there are signs that Workhorse’s chances are less than stellar. The vehicle that Workhorse submitted for testing back in 2019 was created jointly with another firm. But Workhorse discontinued business dealings with that firm. So, while Workhorse remains among the four finalists who submitted a proposal, questions remain regarding their actual vehicle.
At least one research firm believes Workhorse has all but the narrowest chance of winning the contract.
Verdict on WKHS Stock
I can’t see how investors would be willing to pull the trigger on a purchase of Workhorse shares currently. Workhorse’s market capitalization of $1.1 billion on Q1 sales of $84,000 has to have even the most bullish fans worried.
So, maybe the company will see some successes with its Ryder pilot program and that may scale up. Perhaps Workhorse will win a portion, or all of the Postal Service award. But until there is more money likely to be coming in the door, I wouldn’t buy in.
And right now, there’s no news on the horizon that indicates such progress.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing. As of this writing, Alex Sirois did not own shares of any of the aforementioned securities.
