Before the novel coronavirus became part of our reality, electric vehicles and transported fueled by alternative energy sources were among the hottest innovations. Thanks to lower operating and maintenance costs, EVs represent viable solutions for the last-mile problem in logistics. Primarily, this was the top selling point for Workhorse Group (NASDAQ:WKHS). And this narrative only increased in magnitude during this pandemic.
Suddenly, brick-and-mortar retailers, which were already struggling against rising competition from Amazon.com (NASDAQ:AMZN) and other e-commerce outlets, suffered a critical blow.
Like cruise ships and perhaps to a lesser extent airliners, consumers view shopping centers as Petri dishes. Plus, discretionary retailers were dealt another setback, since their products are not exactly essential. Besides, why bother with physical stores when buying online will do just as well?
Naturally, this boosted the case for Amazon and to large extent, WKHS stock. More online purchases means greater demand for energy-efficient delivery vehicles, which fits exactly into what Workhorse is doing. Not only that, more people who may have preferred in-person shopping have tried out the online platform, much to their delight (and safety).
Travis Credit Union came out with an interesting study regarding consumers’ use of cash. According to its analysis, a whopping 58% of Americans “plan to stop using cash completely after the Covid-19 pandemic.” In addition, 49% want cash and coins phased out permanently after the Covid-19 pandemic.
Obviously, this has a longer-term implications for WKHS stock. Presumably, the sudden shift in attitude toward physical cash is tied to perceptions of infection risk. Now, the data on this is limited. It’s possible to get contract Covid-19 if you handle cash provided by an infected person. But experts have also warned that “the risk of getting the virus from cash is low compared with person-to-person spread.”
Still, perception these days is reality. Further, the unnecessary risk of handling cash incentivizes online shopping, which benefits WKHS stock.
Possible Culture Shift Will Support WKHS Stock
Despite multiple positives supporting the bullish argument for Workhorse Group, it’s natural to have some skepticism. At time of writing, WKHS stock has skyrocketed nearly 766% on a year-to-date basis. Theoretically, buying now sets up a greater risk for disappointment down the line.
More importantly, at some point, we will find a solution to Covid-19. Whether it will miraculously go away like President Trump once said or if we find a safe and viable vaccine/treatment, we probably won’t suffer a severe shock like we did in February and March.
When that happens, WKHS stock could see a sharp correction. After all, Workhorse shares were trading hands in single-digit territory until this past summer. I must admit here that the coronavirus fading away, or more specifically, people getting over their fears is one of the biggest headwinds working against WKHS.
However, it’s also possible that we may never get over Covid-19, at least for a generation. This is why I mentioned Travis Credit Union’s cash sentiment data. We’re talking about a majority of Americans planning on not using cash at all. And nearly half want it phased out permanently.
That is an extreme reaction. But I get it – this is an extreme situation.
Further, a range of analyses have suggested that diversity in society may reduce social trust or cohesion. I must warn clearly that these studies are not wholly conclusive. But the inconclusiveness suggests that diversity may correlate negatively with social trust.
With the pandemic and in our post-new normal future, I believe that the diversity of the U.S. will absolutely reduce social trust. That was the case with the Spanish flu, which resulted in “long-lasting social consequences leading to a decline in social trust.”
Cynically, this dynamic is a near-perfect catalyst for WKHS stock. More folks will want to do their shopping at home, which will not only incentivize efficient delivery vehicles, it will make such platforms mandatory.
Look, this isn’t just a bullish argument for Workhorse. When you look at the federal government’s own data, e-commerce as a percentage of total retail sales skyrocketed to 16% in the second quarter of this year. In Q1, the metric was under 12%.
Now that more Americans are used to shopping online, I foresee this allocation toward e-commerce increasing. Again, this will further drive up WKHS stock and similar names.
A Permanent New Normal?
Before you send off an email to my editor, I’d like to clarify my position regarding possible social trust declines. I’m not suggesting that we’re going to have a race war in America. Nor am I pointing out a particular demographic as being responsible for a possible drop in social cohesion.
Rather, it may take a generation (basically, those that are born this year or are very, very young) to forget about this awful year. Judging by the lack of traffic and crowds from this point in time last year, we who are alive and cognizant today may never be comfortable around strangers.
Let’s be honest with ourselves. If someone coughed or sneezed in public next year, “bless you” will not be part of our lexicon. Instead, we won’t say anything as we uncomfortably shift away from that person. Indeed, I can’t remember a time when I sneezed in public. It’s almost as if my body instinctively knows that sneezing equals death.
Thus, I see the new normal as being at least semi-permanent for the “survivors.” That’s not good for cohesion. It is, however, the greatest news for WKHS stock.
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.