Things have looked bleak for Workhorse (NASDAQ:WKHS) stock since the United States Postal Service (USPS) awarded the contract for their next generation electric vehicle (NGEV) to Oshkosh (NYSE:OSK). WKHS stock is down 46% since the Feb. 23 announcement.
The initial value of the contract was $482 million. Since Workhorse has no sales to speak of, this contract would have put it near the top of the line in the crowded commercial electric vehicle (EV) sector.
However, Workhorse didn’t take the news lying down. The company swiftly filed a lawsuit that alleges a breach of contract. The lawsuit has kept Workhorse in the news for the better part of 2021. But I’ve become concerned that there’s a lack of news from the company itself regarding its all-electric trucks. At a time when EV companies find any reason to get themselves in the news, things around Workhorse seem oddly silent.
Perhaps it’s the lawsuit. But while other EV companies are hype machines, Workhorse is very quiet. However, even the staunchest bulls must be a bit concerned about the lack of news coming from the company.
Fighting an Uphill Battle
Workhorse has an argument, at least on principle. When the USPS was accepting bids they seemed committed to placing a priority on electrifying their fleet. Oshkosh’s proposal is for internal-combustion engine (ICE) vehicles. However, while the optics don’t look particularly great for the USPS, it seems unlikely that the court rules in Workhorse’s favor.
The judge listening to arguments had until Aug, 18 to announce if the case will move ahead. On Aug. 20, he ordered the government to respond to a procedural matter. So, the the lawsuit drags on… for now. As I mentioned in a prior article, Workhorse has some prominent Congressional leaders behind them.
However, as InvestorPlace contributor Josh Enomoto pointed out, Workhorse may lose on a procedural matter. Specifically, the company didn’t complete the USPS’s two-part process for challenging procurement decisions. This means that the company will likely not be given any recourse should the judge find a lack of cause to proceed.
‘No News’ on Good News
Earlier this month, the company delivered its first all-electric truck to Cincinnati’s Servall Electric. You would think that would be important news, but I didn’t find the news on the company’s website, which I thought was odd.
I did, however, see a press release about the company’s HorseFly emerging drone program. Drone-enabled delivery is becoming an essential ingredient in the future of last-mile logistics. In fact, the sector could be worth over $100 billion by the end of the decade, ARK Invest believes that drone-enabled shipping could cut last-mile delivery costs by 90%. And Workhorse has a first-mover advantage.
However, as our Muslim Farooque observed, drones won’t give Workhorse a significant bump to their revenue stream anytime soon. Which means investors are going to need loads of patience to hang on to WKHS stock. But the company is giving them little to get excited about.
Investors Need a Good Reason to Buy WKHS Stock
I find myself in an odd position of warming up to the meme stocks. I guess it’s not that hard to understand. Early in 2021, these stocks were trading at prices that were completely uncoupled from reality.
Don’t get me wrong, an equity is worth whatever someone is willing to pay for it. I’m just saying that it’s easier to look at Workhorse as a buy when the shares are trading at around $10 a piece. Here are three reasons that support that.
With an RSI just above 30, WKHS stock is looking oversold. Plus, the stock price has gotten so low that the consensus price target of analysts makes WKHS stock look like a bargain. And institutional investors are holding steady.
But right now, the company’s only shot at viability seems to be to extend the clock on a lawsuit that still will be a longshot and could very well draw unwelcome attention to the fact that the company is missing its stated production targets.
And with short interest hovering around 35%, WKHS stock is firmly in the hands of speculators hoping for a short squeeze. Until Workhorse delivers a new narrative, WKHS stock looks like a heavy lift.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
