The smart money rarely goes for sexy. It goes where it makes most sense. And when it comes to EVs, Workhorse Group (WKHS) is the smart choice. WKHS stock looks built to last.
Yes, this was the year for Tesla (TSLA). It was up 1000% in a year and the momentum didn’t seem to let up. It has fallen back a bit now, but it’s still up 756% in the past 12 months.
Some of this interest is because it’s really the one name that Americans recognize as an electric vehicle (EV) maker with a future. But its market is shrinking in the sense that more competition is rising up from smaller specialized players as well as major global manufacturers with strong distribution and support networks.
The niche markets in EVs are very exciting. From electric semis to pickup trucks with electric motors powering each wheel, to commuter vehicles, the options is expanding quickly.
And WKHS is no exception. It has focused on the delivery van sector. It currently has more electric delivery vehicles (EDVs) on the road than anyone else. And these vehicles log substantial miles, day in and day out, so this isn’t a pilot program – they’re out on the roads now.
Powerful Driving Forces Behind WKHS stock
Also remember that ESG (environmental, social, governance) investing is a huge trend that’s already underway. You can see this companies like Amazon.com (AMZN), that are laser-focused on lowering their carbon footprint.
And it’s a key influencer in the logistics sector, because the logistic companies want their business, so they have to abide by Amazon’s wishes. One of those is more EDVs. Also, Amazon is building out its own logistics division and EDVs are going to be at the top of its list.
But WKHS stock has seen a fair share success during the EV boom that happened once the pandemic hit. The stock is up 635% in the past 12 months. Part of that run is due to the fact that the US Postal Service announced that it was looking to partner with an EDV maker to replace much of its fleet of delivery trucks.
Given the fact that Workhorse is the leader in EDVs, it was bid up in anticipation of this significant win.
However, the original date of the award got pushed once because of the election, then again after the election, and now it’s scheduled for January after a new administration comes in. The last delay happened early last week, so the stock has been consolidating.
Even at its current price, WKHS is only a sporting a market cap of $2.5 billion, so it’s got enough capital to keep expanding its base but it’s not a big-cap player by any means.
Solid Roots and Some Wings, Too
The company started as a division of Navistar International (NVS), a builder of commercial, military and heavy-duty vehicles and engines. Just as its prototype EDV passed its tests, NVA management changed and the EDV division was mothballed. It was purchased at that time and became WKHS.
But WKHS’s story doesn’t stop with its two EDVs. It also has a proprietary telemetrics equipment (Metron) to track the trucks and they move around. And it has a delivery drone (Horsefly) that can deliver packages up to 25 pounds.
Horsefly can be launched and retrieved from a Workhorse truck. That allows for deliveries on properties off the beaten path and is also an important factor in delivering medicine in emergencies and day-to-day situations.
Again, the stock has soared since the potential deal with the US Postal Service, but there is plenty of opportunity for this company to make it big on its own or get bought out at a big premium by a large logistics or consumer goods company.
A cautious strategy would be to buy some now and then add to your position over the next month or two. Even if the Postal Service deal doesn’t go its way there’s still a lot to like and it will certainly be a bargain then.
On the date of publication, the author has no position in WKHS. GS Early did not have (either directly or indirectly) any other positions in the securities mentioned in this article.