The United States Postal Service (USPS) gets blamed for a lot of things. Most commonly, that’s late mail or damaged parcels. In 2020, you can add investors in Ohio-based electric-vehicle (EV) manufacturer Workhorse Group (NASDAQ:WKHS) to the list of aggrieved parties. The USPS is giving shareholders heartburn. After dipping to penny-stock status in 2018 and 2019, WKHS stock exploded this summer on news it was in the running to replace the massive USPS delivery fleet with its battery-powered EV delivery vehicles.
WKHS shares topped $30 in September. However, the last four weeks have been tough, including a single-day plummet of 19% on Dec. 2. The blame for that precipitous drop lies squarely with the USPS, which announced it was delaying its delivery fleet decision.
The aftermath leaves WKHS stock sitting in the $21 range. That’s a significant drop from the September high, but shares in the company spent the first six months of 2020 under $3. So is this a buying opportunity or the start of a correction?
WKHS Stock Spikes in November
There were a number of factors that led to a spike in WKHS stock in November.
Its third-quarter earnings weren’t exactly awe-inspiring (more on those shortly), however, there was some very good news in there as well. The company announced an order for 500 of its C-1000 electric delivery vehicles. The buyer is Pritchard Companies, described as “one of the nation’s largest commercial vehicle distributors” with annual sales in excess of 30,000 units across 50 states.
In addition, EV stocks in general got a push as a result of the election. President-elect Joe Biden’s clean-energy plan is seen as having a huge upside for electric-vehicle producers. A company like Workhorse that produces commercial EVs is a big part of that. Biden’s emphasis on making the country carbon-neutral is seen as a boost for Workhorse’s odds of winning the USPS contract — WKHS is the only company in the running offering a pure electric solution.
Anticipation was building through November for the USPS decision, which was due for the end of 2020. The contract to replace its aging fleet with 180,000 new delivery vans could be worth $6 billion. Even if Workhorse won a contract to replace just a portion of that USPS fleet, it would be a game changer for the company.
The USPS Delays Decision (Again)
By the start of December, WKHS stock had dropped 29% in little over a week. What happened? Prior to the drop, in mid-November WKHS was up 850% since the start of the year.
Some investors were worried that this EV stock was in bubble territory. It’s been in business since 2007 but is still struggling to turn a profit, so that is a valid concern. But the single biggest catalyst was the announcement from the USPS that it was once again delaying its delivery fleet replacement decision.
At this point, the decision is scheduled for some time between January and March 2021.
Bottom Line on WKHS Stock
Workhouse has its issues. This is a stock that gets a “B” rating in Portfolio Grader because of these concerns. Among them, revenue and earnings are virtually non-existent at this point. In the third quarter, it had revenue of just $565,000, and it posted a net loss of $84.1 million. In addition, the company announced it will miss its 2020 production target due to limited battery supply and other issues related to the novel coronavirus pandemic.
However, if it wins the USPS contract (or even a chunk of it), Workhorse will be off to the races. That’s what WKHS investors are betting on. If it wins the USPS business, Workhorse shares will seem cheap at today’s going price. If it gets shut out? That’s when the bubble pops. Until a final decision is announced, expect WKHS stock to continue to yo-yo based on every bit of news leaking out of the USPS camp.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
