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As Shares Pull Back, Take Your Time With Workhorse Stock

After last month’s sell-off, what’s next for Workhorse Group (NASDAQ:WKHS) stock? Shares in the electric vehicle (EV) play soared thanks to two potentially game-changing catalysts. But, as speculators take profit, and others start to doubt its prospects, it’s debatable whether now’s the time to buy WKHS stock.

WKHS stock
Source: Photo from WorkHorse.com

On one hand, despite its 50% decline, the stock is still up more than 400% year-to-date. And, given that the company’s major catalyst (winning the U.S. Postal Service’s $6 billion vehicle contract) remains in play, another parabolic move could be just around the corner.

On the other hand, it’s possible investors are starting to share my bearishness for this stock. Sure, there’s still a pathway to further gains if the company wins the postal service deal. Yet, as more information has come out in recent weeks, there’s more evidence this company’s odds of scoring the contract remain slim.

Another factor to consider: the prospects of Lordstown Motors (NASDAQ:RIDE). In anticipation of that EV company going public, investors bid up this stock, given Workhorse holds a 10% interest in that company.

But, after going public, the EV pickup maker’s shares have tumbled from around $20 per share, to around $14 per share. I’m bullish on RIDE stock, but with the caveat its a cautious buy at best right now.

If Lordstown shares continue to tumble, shares in this EV play will as well. So, does that make this a buy, or a sell? Given so much remains in the air, it’s best to avoid going long (or short) for now.

‘Darkest Before The Dawn’ for WKHS Stock? It Depends

Is Workhouse stock falling out of favor? Or, is it just taking a breather, after its epic run so far in 2020? The jury’s still out. Sure, some previously bullish analysts are now taking a more neutral position. And, with a recent “short report” from short-seller Fuzzy Panda Research pointing out the company’s shortcomings, there’s now more to back up the bear case.

Yet, that doesn’t mean it’s a no-brainer to go short WKHS stock today. Why? While I believe it’s a long-shot, the postal-service catalyst is still on the table.

As InvestorPlace Market Analyst Luke Lango discussed Oct. 26, a win by Workhorse for this contract could mean it becomes for delivery vans what Tesla (NASDAQ:TSLA) is for passenger vehicles. Per Lango’s numbers, shares could soar to as high as $60 per share by 2024.

With this in mind, the profits from going short now (around $15 per share) pale in comparison from the potential gains you could see from going long. Also, with many still chomping at the bit to profit from this EV play, any sort of positive news could pop the stock once again.

Simply put, taking the short side today is not worth the risk. So, does that make Workhorse a screaming buy, after the recent 50% haircut? Not exactly. While there’s much that could propel this stock in coming years, we may have yet to reach the near-term bottom.

Why Workhorse Could be Far From Bottoming-Out

Until we get a decision on the USPS deal, this company’s long-term prospects remain intact. In other words, while it looks overvalued on paper, the chances of it scoring the deal, and leveling up from upstart to up-and-comer, help justify its current valuation.

However, that doesn’t guarantee the stock won’t head lower in the coming weeks. While the results of the Nov. 3 U.S. presidential election may boost Lordstown shares, as well as Workhorse stock, it’s no slam dunk. In fact, a positive election result could still drive shares lower, if it winds up being a “buy the rumor, sell the news” type of situation.

But, the election isn’t the only short-term driver at play. Back in October, postal officials pushed back the decision date for its new vehicle contract to December. Sure, there’s no reason to doubt the postal service will have a result by this new due date.

Yet, there’s still a risk the decision gets delayed once again. If this winds up happening, expect WKHS stock to sink even lower.

Whether Bullish or Bearish, Sit Things Out for Now

So, what’s the call on Workhorse? For those that are bullish, now may not be the time to dive into a position. Sure, the stock’s taken a dive in recent weeks, and after the pullback, today’s prices look like a temping entry point.

But, considering the many near-term factors that could sink shares further, we may be far from the bottom. On the other hand, all it’ll take to send this stock back to $30 is a breadcrumb of good news. With this in mind, going short doesn’t look so wise either.

The verdict? Whether bullish or bearish, sit on the sidelines with WKHS stock for now. Today’s uncertainty could clear up in the coming weeks.

On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.

Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/as-shares-pull-back-take-time-wkhs-stock/.

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