While electric vehicles have dominated the markets this year, it’s not just the end products that appeal to investors. Rather, we’re seeing a tangible shift toward clean energy adoption. Therefore, companies like Workhorse Group (NASDAQ:WKHS) have enjoyed tremendous demand. However, WKHS stock is more than just a speculative bet in the EV space. Rather, it has two key elements that should distinguish it from the competition.
As our own Todd Shriber recently noted, underlining the momentum for WKHS stock are smart business strategies. First, Workhorse carved out an important niche within the broader EV market, electric delivery trucks. In that way, WKHS avoids direct competition with sector heavyweight Tesla (NASDAQ:TSLA). Indeed, anytime you can sidestep an organization that owns 80% of a market subsegment is a critically intelligent maneuver.
Second, Workhorse has focused not only a viable niche but actually delivering products. In this manner, WKHS stock doesn’t just attract investors from a scientific narrative. Rather, the underlying company has proven the concept – and major blue chips, such as United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX), are buying in.
To that effect, Workhorse leverages advanced green energy technology to address the logistics industry’s last-mile problem. As you likely know, it’s the final portion of the logistics spectrum – when the product reaches your door – that’s the most expensive.
Why? When products travel by air, for instance, the flight doesn’t have to deal with stoplights or traffic. Instead, those inconveniences are absorbed by last-mile delivery trucks. What Workhorse brings to the table, then, is a platform that is far more energy efficient. Further, electric vehicles are typically more reliable than combustion-engine vehicles.
Best of all, clean-energy trucks are probably the only solution.
WKHS Stock Benefits from a Scientific Reality
If pure logistics efficiency is the only thing that matters, delivery drones represent the ideal choice. Here, the platform goes from point A to point B without any hassles: no stop signs, no congestion, no BS. Thus, it’s not terribly surprising that Workhorse offers a drone platform called HorseFly.
When you think about it, drones don’t have a last-mile problem: every mile is just a mile.
However, Workhorse is best served focusing largely on its delivery trucks. Until drones can solve a critical problem – noise pollution – electric trucks likely represent the best solution for a while.
Imagine a backdrop that is becoming all too common in America these days. Like most other reasonable people that don’t listen to BS conspiracy nonsense, you practice mitigation protocols because it’s the right thing to do. Of course, the Ken and Karens of this country don’t exactly share the same sentiment.
Now imagine a bunch of drones buzzing in the air, creating an environment akin to every neighbor in the block renovating their home. It will be a nightmare, which is why I like WKHS stock for its trucks, not so much for its drones.
Frankly, the idea of noise pollution from drones didn’t dawn on me previously – I was too busy being marveled at the innovation. However, a NASA report set me straight. According to the space agency’s research, most people find drone noise more annoying than the rumbling from cars or trucks.
Particularly, what caught my eye was this nugget of wisdom: “…their sound at higher altitudes made almost no difference in the annoyance level.”
Frankly, this is alarming because unmitigated noise will surely lead to pushback from voting Ken and Karens. In this case, who could blame them?
Workhorse Is Sitting Pretty for the Long Haul
Again, until drones control their noise issue, investments heavily levered to EVs like WKHS stock will enjoy a long, fairly uncontested upside pathway. The way I see it, the economics of quiet drone service may not be viable for several years.
Retail drones are crazy noisy, and they don’t carry anything. Scientifically, if you wish to increase airborne payload, you must increase power. And increased power typically creates more noise. Now, I’m sure it’s possible to create silent drones a-la Zero Dark Thirty. But to do so will be incredibly expensive, thereby making them economically nonviable.
Also, keep in mind that if the remote work phenomenon lasts for years beyond the pandemic, then these drones must be whisper quiet. With the traffic from our roads being sent to the air, we will have multiple drones – every single day – buzzing over our heads. Therefore, the collective noise could be compounded, creating political problems.
Limited drone adoption could still be relevant in the here and now. Further, drone noise may not be much of an issue in major metropolitan areas. However, for mass-scale integration, electric trucks have the delivery market locked down. Thus, as a long-term play, WKHS stock makes sense.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.