Workhorse Group (NASDAQ:WKHS) took a hit early last month when Fuzzy Panda Research published a report that the electric-vehicle startup misled investors on various issues, including the odds of it winning a $6.3 billion U.S. Postal Service contract to replace its aging postal delivery trucks. Through Oct. 30, WKHS stock is down more than 33% since the allegations surfaced.
Let’s get something straight.
I don’t care how cocksure Fuzzy Panda is about its short position in Workhorse. If you, Mr. Average Investor, are dumb enough to listen to an organization that goes by the name of “Fuzzy Panda,” you deserve everything bad that happens to you on this particular stock.
Investing is tough enough.
But listening to Fuzzy Panda for your investment advice is pure idiocy. Even if it turns out to be right about the problems Workhorse is experiencing with its truck prototypes for the USPS contract, I can’t and won’t take it seriously.
Here’s why.
WKHS Stock Is a Speculative Buy
Anyone who owns Workhorse stock understands the risk they are taking by investing in the electric-vehicle startup. Or at least they should.
The history of Workhorse goes all the way back to 2007 when it experimented with the electrification of a two-seater roadster. In 2010, it converted a two-seater Saturn Sky to electric, making it the only mass-produced vehicle out of eight finalists in a contest sponsored by Progressive (NYSE:PGR), the Ohio-based insurance company.
At the time of this contest, it operated under the name AMP Holdings. It changed its name to Workhorse Group in April 2015. Its sales and losses in fiscal 2014 were $177,500 and $6.6 million, respectively. In 2019, they were $376,562, with a loss of $37.2 million.
In between those two lean years, it managed to generate $10.8 million and $6.4 million in sales in 2017 and 2016 from UPS (NYSE:UPS) and other customers. It lost $61.8 million on the $17.2 million in combined sales.
I don’t have to read Fuzzy Panda’s report to know this is not a blue-chip company. If not for all the electric-vehicle special purpose acquisition companies (SPACs) in 2020, there wouldn’t be an iota of interest in WKHS stock.
But that doesn’t mean it’s a good short. It means it’s a very speculative buy and only risk-tolerant investors need apply.
My last article about Workhorse came a day before the Fuzzy Panda news hit the wires. I argued that if you were an aggressive investor, WKHS stock ought to be on your watchlist.
“[L]ike the race to develop Covid-19 vaccines, the competition amongst companies looking to capture a piece of the commercial electric vehicle market is intense. One minute, Workhorse is the horse to bet on. The next minute it’s Nikola Motors (NASDAQ:NKLA), Rivian, or BYD (OTCMKTS:BYDDF),” I wrote on Oct. 7.
“Handicapping the race is anything but easy.”
Maybe Workhorse doesn’t have a shot at the USPS contract. And, most certainly, its stock possesses a nosebleed valuation. But commercial electric vehicles will happen in large numbers, especially where the last mile is concerned, and the company is positioned better than most to take advantage of this reality.
With or without USPS.
The Bottom Line
My InvestorPlace colleague, Louis Navellier, recently wrote about Workhorse and why he believes it’s a strong buy.
“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,” Navellier wrote on Oct. 27.
“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.”
Let’s be clear.
My colleague isn’t saying that WKHS stock is a slam dunk. He recognizes there is a risk in betting on it merely because of the postal service’s potential contract.
Far from it. He’s merely pointing out that the stakes are high, and Workhorse is playing in the right sandbox for a big financial windfall.
As I’ve said in past articles, Workhorse is an excellent speculative buy, emphasizing speculative.
As for Fuzzy Panda — get a new name.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
