It’s safe to say that February and March weren’t the best months for investors in electric delivery van maker Workhorse Group (NASDAQ:WKHS). With the share price now down 28.5% for the year, the sentiment surrounding WKHS stock couldn’t be much worse.
Much of the disappointment is undoubtedly related to Workhorse’s missed opportunity with a well-known government client.
The thing to keep in mind is that this tale could still have a happy ending. Moreover, Workhorse appears to be generating revenues from other clients.
I’m certainly not advising that anyone should pour his or her entire account into Workhorse shares. Nonetheless, the prospect of a positive surprise amid widespread pessimism makes the stock worth considering now.
A Closer Look at WKHS Stock
It’s amazing to consider that just a year ago, WKHS stock was trading below $2. Even with the recent share-price rout, it’s possible that the stock will never trade at that price again.
Consider that 2020 might forever be remembered as the year when electric vehicle stocks exploded. It was last summer that Workhorse shares powered their way up to $20.
The stock price wiggled and wobbled, but still ended 2020 near $20. The biggest gains were yet to come for WKHS stock, though, as the share price rallied to a 52-week high of $42.96 on Feb. 4. 2021.
Then came the crash, unfortunately, as the stock price fell sharply in late February and much of March. By April 1, the share price had dropped to $14.14.
So, what could possibly have caused WKHS stock to crater? And, is there any hope for a recovery?
Sorry, No Deal for You
As InvestorPlace contributor Sarah Smith reported, on Feb. 23, 2021, Workhorse shares plunged nearly 50% because the United States Postal Service (USPS) awarded its fleet electrification contract to Oshkosh (NYSE:OSK) instead of Workhorse.
Obviously, this was a major blow to Workhorse and its stakeholders. I recall that for months, commentators on financial message boards were buzzing about how Workhorse would have been a perfect fit for that contract.
And to be honest, hardly anyone was talking about Oshkosh. Many people just assumed that Workhorse would win that USPS contract.
So, here we have a textbook example of why investors should never assume anything. It’s the age-old problem of “buy the rumor, sell the news.”
Still, let’s not overstate the importance of the USPS contract. Workhorse recently released its fourth-quarter and full-year 2020 fiscal results, and the company seems to be doing fine:
- Order backlog of more than 8,000 vehicles
- Raised $270 million in capital over several financings
- Cash position of $215 million as of March 1, 2021
- Sales for the 2020’s Q4 totaled $652,000, a marked improvement over the measly $3,000 generated during the year-ago quarter
- Q4 net income of $280.5 million, a significant increase compared to the net income of $655,000 recorded during Q4 2019
Hope on the Horizon
All in all, we can conclude that Workhorse can survive and even thrive without the USPS contract.
Still, it certainly would be nice if the company could find a way to build a business relationship with the USPS.
And who knows — maybe there are reasons to hold out hope. Not long ago, Workhorse issued an announcement suggesting that the company is still in discussions with the USPS.
Granted, the specifics of those discussions weren’t provided. Yet, Workhorse CEO Duane Hughes did tease the company’s stakeholders with the possibility of renewed current and/or future negotiations.
The “meeting with the USPS marked the first step in what we expect may be a prolonged process to explore our options and possibly pursue further action related to our NGDV [Next Generation Delivery Vehicle] bid,” Hughes explained.
As further developments are revealed, you’ll definitely want to stay on the lookout for updates from InvestorPlace‘s market reporters.
The Bottom Line on WKHS Stock
Only time will tell whether Workhorse will have any success in persuading the USPS to develop a business relationship the company.
Yet, at least there’s hope that a USPS-Workhorse deal could be worked out at some point.
In the meantime, WKHS stock investors should rest assured that the company is doing just fine and consider that the share-price drop may be an opportunity to capitalize on the market’s extreme pessimism.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.