Will they or won’t they get the contract? This went on for a while before finally Workhorse (NASDAQ:WKHS) lost the famous large order from the U.S. Postal Service. As a result, WKHS stock collapsed 70%.
Losing one sale, even a large one, shouldn’t break the company. That is if the fundamental point behind the remaining bullish thesis. That order would have made for a great start. But now they have to go on with their business as usual. Success will come if management executes on its plans.
First let’s address the industry as a whole.
Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO) are leading the electric vehicle charge. Hundreds of other companies are trying to carve a little piece of the action, too. Even General Motors (NYSE:GM) is bringing back its Hummer as a super-truck format.
This is the first time that the EV is a serious contender to the internal combustion engine, or ICE. Almost every major vehicle manufacturer has committed to completely switching over to EVs this decade. Even though the transition will be slow, the EV market outlook is excellent. WKHS stock, therefore, has room to grow with it.
This brings us to their individual situation. Unfortunately, if you search for Workhorse articles on Yahoo Finance you find more investor lawsuits legal links. Those are not the kinds of headlines they need to encourage investors in the WKHS stock. There are famous investors who are steadfast short the company with conviction. Meanwhile management is still meeting with postal service officials to learn from what just happened on this order.
Function not Form
Their trucks are not sleek looking like Tesla or Lucid (NYSE:CCIV) vehicles. They are utilitarian and serve a niche market of new-generation delivery vehicles. This is a fancy term to describe weird looking vans. Function should win over form but I doubt that most of us will be shopping for one anytime soon.
My point here is that WKHS trucks are not for the masses. They serve a very narrow market by nature.
It is a shame that the postal service chose to give a huge order to just one company. If the administration wants to fulfill its election promises, they’d be better off spreading the wealth. That would better serve their purpose of EV ubiquity. Feast or famine is not good for an industry to thrive. They should have allocated the 165,000 vehicles order to help many.
Now, only Oshkosh (NYSE:OSK) has the spoils and the rest will starve. Critics point out that Oshkosh is not an EV company. They may end up delivering ICE machines still.
Believers Should Ignore Volatility in WKHS Stock
I wrote about its upside potential since early August of last year. WKHS went on to deliver more than 150% before crashing. Along the way, it had big peaks and valleys but so is the nature of a startup stock. This fits within the early argument we made today. The bulls need to look past this one order. However they shouldn’t be blind. It’s important to stay realistic with their expectations.
For those who believe in the company long term, this setback is a hiccup. These days Wall Street is all about investing in memes. But eventually they will go back to trading actual progress, not just speculation. That’s why the small-caps are leading all other indices. They are chalk full of fluff companies with questionable current metrics. This is the ARK style of investing. So far ARK is not investing in WKHS so the herds are probably waiting for that.
ARK is all in on disruption, which is another word for future high-risk successes. It is not reasonable to put all the eggs in one speculative basket. It could work for very young investors for a while. But for the most others, a healthy stable portfolio should only have a small percentage of WKHS-like stocks. Let this be a kind reminder for the super WKHS fans.
Earlier I noted that it’s the long term that counts, which makes me sound bullish. However, I won’t pound the proverbial table to buy it. I need more information or clues from management before I reassess. There are plenty more exciting speculative bets I can slot into my risk portion of my folio.
Investors Need More Clues
The P&L gives me nothing because their prosperity is yet to come. Management should refocus investor attention to what’s going well for them now instead of dwelling on the past. With a bit more of those headlines this year, it could make for a decent gamble on the EV delivery fleet. Meanwhile, this week it may get sympathy moves when Lordstown Motors (NASDAQ:RIDE) reports earnings. Workhorse still owns a stake in it, which gives investors two at-bat opportunities.
The technicals have held up reasonably well. Seven months ago I shared the chart that showed support at $14 then $12. Those two played key roles during the extreme duress of late. That’s comforting for those who own it into those levels.
I will leave you with this final reminder note: Losing a sale is a setback on the sales side of things. It doesn’t affect the company goals on anything else.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.