Slowly Accumulate Workhorse Stock on the Rebound

There’s been a flurry of activity in the electric vehicle space this year. Last-mile delivery specialist Workhorse (NASDAQ:WKHS) is just one of many purveyors of new-generation vehicles. So, why should anyone choose WKHS stock over other investments?

Image of a Workhorse (WKHS) logo and drone on the side of a truck.
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That’s a valid question, and we have to scratch beneath the surface to see what’s special about WHKS stock. After all, electric vehicle stocks are risky and this particular stock has been known to make some wild price moves in both directions.

Just for that reason alone, it’s not a great idea to pour your entire net worth into WHKS stock. However, this doesn’t mean that you can’t gradually accumulate shares and build a moderate position.

No one can guarantee profits, but we can at least investigate this fascinating company and its potential for strong returns in 2021. Don’t expect perfection, but perhaps we’ll at least find that Workhorse is carving out its own niche in delivery truck electrification.

A Closer Look at WKHS Stock

Midday on Nov. 20, the bulls are delighted as WKHS is posting a nice 10% gain. This is not unusual, but neither are deep red days in which WKHS might shed 10% or more.

Clearly, this is not your father’s or your grandfather’s automotive stock. Volatility is the norm with WKHS stock, so you’ll need to brace yourself for a possibly bumpy ride if you choose to invest in this.

Also, don’t expect to be impressed with WKHS stock if you’re using old-school valuation metrics. For example, the stock has trailing 12-month earnings per share -$2.65. That’s not encouraging for value-minded investors, but electric vehicle stock traders might need to learn to accept negative earnings as typical.

The good news is that WKHS stock holders are enjoying a swift recovery in the share price. The stock was practically cut in half from mid-September to the end of October. But then, WKHS surged from $15 and change to $25. This should give the bulls renewed hope for a full recovery to the 52-week high of $30.99.

Delayed Progress

Not long ago, Workhorse admitted that its vehicle production has been profoundly impacted by the onset of the novel coronavirus.

Specifically, the electric delivery van maker conceded that 36% of its plant workers are either sidelined by Covid-19 or awaiting test results. So obviously, delays in vehicle production should are to be expected.

Still, just because Workhorse’s progress is delayed, this doesn’t mean that there will be no progress at all. CEO Duane Hughes clarified that, depending on how the pandemic plays out, Workhorse plans to build 1,800 vans next year.

With a current cash position of more than $260 million, Workhorse appears to be sufficiently capitalized to meet this objective. The company’s stakeholders should hope that Workhorse’s plant employees will recover quickly and/or test negative for Covid-19 so that vehicle production can get back on track soon.

A Big Order

If WKHS stock holders needed a shot in the arm, they just got one as Workhorse recently announced a significant purchase order.

The order is from Pritchard Companies, and it’s for 500 of Workhorse’s all-electric C-1000 delivery vehicles. Now, I’ll grant that an order of 500 vehicles wouldn’t be game-changing for a bigger automaker.

For Hughes, however, this order represents a big step forward for Workhorse:

“With this significant order and agreement from Pritchard, we can build upon our nationwide distribution network and expand the number of potential fleet customers that will be able to operate and own a Workhorse delivery truck.”

And it gets even better. Ryan Pritchard, the COO of Pritchard’s Electric Vehicle Division, views the 500-vehicle purchase “as being the first of many future orders.” Moreover, Pritchard looks forward “to growing with Workhorse in 2021 and beyond.”

Mind you, Pritchard has a massive dealership a network. In fact, the company’s network sells over 30,000 trucks annually in all 50 U.S. states. Hence, the 500-vehicle purchase order really is a big deal for Workhorse.

The Bottom Line

There’s no denying that Covid-19 has caused a setback for Workhorse. However, this problem doesn’t mean that production won’t move forward at all.

The Pritchard purchase order is quite significant for Workhorse. WKHS stock holders should be confident, but not excessively so. This stock involves risks, so it’s best to keep one’s position size moderate.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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