Use Weakness in Workhorse Group Stock as an Opportunity to Buy

Electric vehicle stocks have been incredibly explosive.

  • Tesla (NASDAQ:TSLA) jumped from $400 to $566 in recent weeks
  • Nio (NYSE:NIO) ram from $25 to $55
  • Global X Autonomous & Electric Vehicles (NASDAQ:DRIV) jumped from $17.50 to $22
  • Workhorse Group (NASDAQ:WKHS) ran from $16 to $30
A Workhorse (WKHS) W-15 hybrid electric pickup truck on display at a branding event in Flatiron Plaza in New York.
Source: rblfmr /

All because of an EV craze that’s not likely to fade any time soon.

For one, according to the Boston Consulting Group, EVs could account for a third of all auto sales by 2025. Two, Joe Biden seems to be a fan of EVs, too.

In fact, his site notes:

“There are now one million electric vehicles on the road in the United States. But a key barrier to further deployment of these greenhouse-gas reducing vehicles is the lack of charging stations and coordination across all levels of government. As President, Biden will work with our nation’s governors and mayors to support the deployment of more than 500,000 new public charging outlets by the end of 2030.”

In addition, major automakers, like General Motors (NYSE:GM) just announced that it will invest $2.2 billion in U.S. manufacturing to increase EV production.

While the WKHS stock recently pulled back from $30 to $19.73, don’t count it out just yet.

There’s Still Plenty of Reason to Get Bullish on Workhorse Group

The last time I weighed in on the stock, I said, “I strongly believe the WKHS stock could rally back to nearly $31 a share again soon.”

That was on Oct. 23, as WKHS stock traded at $20 a share. It would run up as high as $30.02, which just missed our target price.

But again, don’t count out the stock just yet. It’s only down on another USPS delay. The first time the USPS delayed the contract was in early October 2020, which pushed the WKHS stock from a high of $30.59 to a low of $15.13.

As noted at the time:

“Due to the current COVID-19 pandemic and its impact on Postal Service and supplier operations, an award(s) is currently planned for the production phase by the end of the calendar year,” USPS spokeswoman Kim Frum said.

WKHS would then recover on the realization it was just a delay. It wasn’t news that Workhorse didn’t receive the contract.

Then, after recovering, the WKHS stock fell again on another USPS delay. Now, the USPS expects to make its decision in the second fiscal quarter of 2021. Again, they used the pandemic as a reason for delay.

“Amid continuing Covid-19 concerns, and in order to provide for capital investment activities and required approvals, the program schedule has been revised and a decision is now planned for quarter 2 of fiscal year 2021,” the USPS said in a statement.

However, Use the Weakness as a Reason to Buy

Weakness in the stock is a buy opportunity, in my opinion.

While the contract news is a short-term negative, it doesn’t mean Workhorse Group is out of the running.

Plus, as noted by Barron’s contributor Al Root, “The potential addition of an “s” to award is significant. It raises the possibility of multiple winners. That’s good for Workhorse’s business because it raises the odds of success.”

In addition, while it’s not a certainty Workhorse stock will win the postal service contract, investors can still make money on the stock on the anticipatory momentum.

For example, buy now and simply wait for the momentum to build up ahead of the contract date just as we mentioned in late October 2020.

Analysts Still Seem to Like WKHS Stock

Over the last month, Oppenheimer analyst Colin Rusch said WKHS stock was a leader in last-mile deliveries. He has a price target of $23.

And, as I noted on Sept. 25, “Cowen analyst Jeffrey Osborne is impressed by WKHS stock.

“The [second half production] ramp remains on track and management continues to target [making] 300 [to] 400 vehicles by the end of the year. After a tough few quarters, we see greener pastures ahead.”

While I don’t expect the stock to explode overnight, I still do believe it could see $31 again soon. Use weakness as opportunity.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. Ian Cooper, an contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.

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