Workhorse (NASDAQ:WKHS) is a unique name among electric vehicle stocks. The Ohio-based company has been part of the surge in EV stocks that kicked off in 2020. WKHS stock rewarded investors handsomely last year, with 546% growth.
However, where most of the companies in the spotlight were focused on electric cars, Workhorse makes electric delivery vehicles. A huge part of the Workhorse story has been the company’s bid to win a massive USPS delivery van contract.
When that fell through in February, WKHS stock crashed, dropping 63% over several weeks.
For some, the loss of the USPS contract has been cause to write off Workhorse. However, I see opportunity.
Delivering a fleet of electric delivery vans to the USPS could have been worth up to $6 billion, so there’s no denying the loss stung Workhorse. But the market for commercial EVs is much more than the postal service. Its couriers, local delivery services and countless trades like plumbers and electricians that use vans and small trucks. And the government is pushing to have those vehicles electrified.
That makes the current price of WKHS stock — depressed by the USPS loss — very attractive.
The Commercial EV Market Is Huge
Had Workhorse won the USPS contract, it would have been tapped to deliver between 50,000 and 165,000 EVs over 10 years. That is a massive order. But it’s just the tip of the iceberg.
The U.S. federal government alone owns 645,000 vehicles. In January, President Joe Biden signed a “Made In America” executive order that aims to have that entire fleet replaced by EVs. In order to invigorate U.S. manufacturing, those 645,000 EVs are to be made in America.
That order is nothing but good news for Workhorse. In fact, WKHS stock spiked to close at an all-time high of $41.34 within days of that announcement.
The government fleet is a massive opportunity. And having the government actively pushing electrification and American manufacturing is going to have a ripple effect throughout the private sector as well.
When you look at the global picture, the demand for commercial EVs is poised to explode, with the U.S. being ground zero. A new report from Markets and Markets shows that global commercial EV sales in 2020 were 129,000 units. By 2028, that is projected to exceed 2 million units, with a 41.1% CAGR.
The report sees the demand for low emission commercial vehicles having a particularly big impact in the U.S., noting: “North America is projected to be the fastest-growing market due to the high adoption rate of electric vans in the logistics sector in the region … The market in the US is expected to grow exponentially by 2028.”
What Are the Analysts Saying?
The announcement that USPS had chosen to go with another option instead of Workhorse led to a crash in WKHS stock. It also spawned a lawsuit accusing the company of misleading investors over its chances to win the contract.
Understandably, some investment analysts quickly issued downgrades in the aftermath. For example, Roth Capital analyst Craig Irwin downgraded WKHS from “Buy” to “Hold” with a $15 price target.
Other analysts saw this as a setback and not the end of the world. BTIG’s Greg Lewis lowered his price target from $26 to $24, but kept his “Buy” rating. Cowen analyst Jeffery Osborne dropped his price target to $18 from $25, but maintained his “Buy” rating. Osborne told Barron’s:
“Our Reaction: Shocked. While we were not modeling success in the USPS, we had anticipated Workhorse would play a role … Especially given the administration’s stance around government fleets being zero-emission.”
Bottom Line on WKHS Stock
Losing the USPS contract was a blow to Workhorse. That was a contract that could have been worth $6 billion. However, the market reaction to the news has been more severe than warranted. When you look at the size of the commercial EV market, then add in the federal government’s push to electrify delivery vehicles, plus the buy American mandate?
The punishment of WKHS stock looks like a real opportunity to snap up shares in a Made-in-America commercial EV company just as demand is starting to heat up.
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.