With Workhorse Group (NASDAQ:WKHS) stock down nearly 30% in the past month, now is a good time for investors to take a position in the electric vehicle maker.
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Since November 24, WKHS stock has fallen to just over $20 a share from $28.87. The decline makes the stock an attractive buying opportunity for investors who want exposure to the fast growing electric vehicle sector.
The Cincinnati, Ohio-based Workhorse is focused on manufacturing electric powered delivery and utility vehicles (vans and trucks). It’s a niche strategy that has lots of growth potential. And it has paid off for investors so far. Year-to-date, Workhorse stock is up nearly 1,500%. During the market crash in March of this year, the company’s share price was just $1.32.
Growing Demand
Given its niche focus on electric delivery vehicles, it is unlikely that WKHS stock will be able to replicate the success of Tesla (NASDAQ:TSLA), which manufactures electric sedans and sport utility vehicles (SUVs) for the broader mainstream market. However, Workhorse can still make some noise in the electric vehicle space, especially as the company is competing for some very large, and potentially lucrative, contracts.
Workhorse is on the shortlist for a U.S. Postal Service contract to purchase 180,000 new trucks to upgrade its national delivery fleet. That shortlist consists of just three companies: Morgan Olson and an alliance between Ford Motor Co. (NYSE:F) and Oshkosh (NYSE:OSK). And the contract with the U.S. Postal Service is estimated to be worth $6.3 billion. Winning that contract would represent a windfall for Workhorse and its shareholders.
While the Postal Service contract has been delayed several times, it is now being reported that the contract will be awarded in the first quarter of 2021. With the incoming administration of president-elect Joe Biden viewing electric vehicles as a pillar of their climate change strategy, ensuring the U.S. Postal Service awards the contract and begins transitioning its fleet to electric vehicles is sure to be a priority. Workhorse has made the Postal Service’s final shortlist from an original list of bidders that numbered 15 companies.
In anticipation of the U.S. Postal Service contract being awarded, Workhorse is negotiating with General Motors (NYSE:GM) to takeover the Lordstown Assembly plant, a 6.2 million square foot manufacturing plant in Lordstown, Ohio that Workhorse already owns a 10% stake in.
Production Targets
Unlike many other electric vehicle makers, Workhorse is not a company that has sprung up in past 18 months. Workhorse Group has been a going concern since 1998 and went public in 2010. While the company remains unprofitable, it is an electric vehicle manufacturer that is well beyond the initial concept phase with its electric vans and trucks. The company has set a goal of producing 300 to 400 vehicles by the end of 2020, and management has a target of producing as many as 1,800 vehicles in 2021.
In fact, the electric vehicle market has been growing exponentially in recent years and there are expected to be more than 250 million electric vehicles driven around the world by 2030, according to the International Energy Agency (IEA). In terms of the electric commercial vehicle market, it is forecast to reach $178.56 million by 2026, up from just $11 million in 2020, for a compound annual growth rate of 8.3% in the five years between 2021 and 2026, according to Valuates Reports.
North America is expected to hold the largest electric commercial vehicle market share as major companies such as Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) convert their vehicle fleets to electric. The transition to electric commercial vehicles will be driven, in large part, by legislation from state and federal governments that mandate a move away from fossil fuels in the coming decade.
Buy WKHS Stock
Workhorse’s fortunes are tied to the pending U.S. Postal Service contract. However, it’s important to remember that Workhorse has other opportunities on the horizon, especially given the explosive growth that’s expected in the electric commercial vehicle market.
The fact that the company is already producing its electric commercial vans and trucks puts Workhorse in a different category than other electric vehicle makers, many of whom are stuck at the preliminary design phase. With a friendly presidential administration coming into office in January and the U.S. Postal Service contract expected to be awarded by the end of March, WKHS stock looks pretty attractive at $20 a share.
On the date of publication, Joel Baglole held shares of TSLA.
