Unfortunately for bulls, Workhorse (NASDAQ:WKHS) appears to be the latest victim in the EV market. After soaring more than 700% year to date, WKHS stock is down 20% this morning. So what happened to the red-hot name? And what else do investors need to know?
To start, Workhorse differentiates itself in the electric vehicle space by focusing on all-electric trucks for last-mile delivery. That differentiation has continued to attract investor attention. Why? Well, Workhorse is working to electrify a different market and has big potential as long as it can round up new customers. It does count United Parcel Service (NYSE:UPS) and Ryder (NYSE:R) among its fleet customers, but Workhorse has been waiting on one big deal.
Importantly, that is where the selloff in WKHS stock comes in today.
All through 2020, investors have been counting on a contract from the United States Postal Service. With a fleet of aging and faulty trucks, the USPS has long been hoping to electrify its fleet. At the heart of this goal? A $6 billion contract to replace approximately 180,000 delivery vans. Workhorse has continued to thrive with this catalyst in mind, especially now that it is one of three finalists. However, the USPS just threw WKHS stock a major curveball.
Investors likely know that the USPS contract has not been smooth sailing for Workhorse. The postal service delayed making a decision several times in 2018 and 2019. Then, it was supposed to deliver an answer in early 2020. The novel coronavirus pushed that back to the end of 2020. Yesterday, a spokesperson pushed that deadline even farther. Now, citing Covid-19 concerns, the USPS plans to make its electric fleet decision some time during the first quarter of 2021.
Without a year-end decision in sight, WKHS stock is facing major selling pressure.
WKHS Stock and the All-Electric USPS
If Workhorse has other customers and a solid business model, what does this USPS delay really mean for WKHS stock? Well, InvestorPlace Markets Analyst Luke Lango said it best. Although Workhorse is no stranger to the public markets, having first debuted in 1998, many investors just got hip to the name this year. Importantly, many of those investors warmed up to WKHS stock because of the USPS contract.
With more and more companies going electric for last-mile delivery, the USPS contract is incredibly appealing. Additionally, it may be the largest and most valuable contract in the electric delivery market.
For investors, that means that all of the setbacks with the USPS contract are especially painful. Add to that issues with Workhorse trucks during USPS trials, short-seller reports and growing competition, and you have a reason for anxiety. As Lango also points out, some investors are worried that with continuing delays, Workhorse could lose out to one of its competitors.
What should you do right now? Try not to panic, and continue to do your own research. Do you like WKHS stock beyond the USPS contract? If you do, perhaps you should chalk this delay up as just another victim of the coronavirus. As USPS spokesperson Kim Frum said, the postal service simply needs more time to overcome pandemic hurdles and get capital in order. If that is really the case, the USPS catalyst for Workhorse could just be a few more months away.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.