Workhorse (NASDAQ:WKHS) shares have been sliding after closing above $30 in mid-September. Why? WKHS stock is feeling the effect of a continually delayed decision from the U.S. Postal Service for the replacement of its delivery fleet.
Workhorse is one of several companies left in the running, and the only pure-electric play. The contract could be worth $6 billion. But after starting the bidding process in 2015, the USPS is now looking at deployment of a new fleet in 2022.
The suspense is killing many investors. After gaining 1,154% from the start of the year through Sept. 18, WKHS stock has been in a slump. At this point, it’s down 38% over the past six weeks.
Sure, this is a disappointment for those who bought in mid-September. But if Workhorse lands that USPS contract, September’s performance is going to feel like a rehearsal for the real show.
USPS: A Long History of Electric Delivery Vehicles
The United States Postal Service contract holds huge promise for Workhorse, but it also shows there is risk for WKHS stock.
Electric vehicles seem like a perfect fit for the USPS. It’s focused on in-city delivery of letters and packages, with vehicles that sit unused overnight. An electric fleet would cut pollution. An electric fleet could recharge overnight. No fuel depots required, and there would be much cheaper “fuel” costs. An electric fleet should also be less expensive to maintain than vehicles using traditional gasoline engines.
USPS recognizes that perfect fit. In fact, it has a long history of trying out electric delivery vehicles. The first test dates back to 1899! However, despite dozens of trials of varying scale, EVs have never succeeded in becoming go-to delivery vehicles. The USPS has cited concerns like “catastrophic battery failure” and loss of power in cold weather.
In its history of EVs in the Postal Service, the USPS describes what happened in a 1980 trial:
“In 1980, the Postal Service ordered 375 futuristic-looking electric delivery vehicles from Commuter Vehicles, Inc., of Sebring, Florida, with plans to buy more in succeeding years. Two hundred and thirty-one of the vehicles were delivered to Post Offices in South Florida in 1981, but motor failures and a dispute with the company over warranty terms grounded the fleet less than a year later. The vehicles were left parked during a legal dispute with the company over contract terms, and the remaining vehicles ordered were never delivered.”
All About the Financials
The appeal of WKHS stock is not in the company’s current financial performance.
Looking at its last quarterly results, Workhorse posted sales of $92,000 for the quarter and a loss of 12 cents per share. However that quarterly report was full of promise. To start, the company delivered several of its C-Series electric vans for short-term rentals. Plus, Workhorse received an initial order for 20 C-1,000 trucks and closed $70 million in financing. Lastly, WKHS stock was added to the Russell 3000 Index.
Bottom Line on WKHS Stock
The long history of electric vehicles in the USPS goes a long way toward explaining why the organization is taking its time now. Success has been fleeting. However, with dozens of attempts through the years, it also shows that the USPS remains very interested in the possibility of electrifying its fleet.
An investment in Workhorse is all about the future and potential for growth. The big prize is the USPS contract, but even if Workhorse loses out or lands just part of that order, the time for EVs is here and Workhorse is in a position to take advantage of that on the commercial delivery front. There are also other catalysts besides the USPS. That bodes well for the long-term growth prospects of WKHS stock.
At current prices, this could be a good opportunity to hop on the WKHS stock train. And if Workhorse lands that long-delayed USPS contract, even the 2020 all-time highs for WKHS shares are going to seem cheap.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.