Can Workhorse Group (NASDAQ:WKHS) stock muscle into the broader electrical automobile market? At present, the Cincinnati, Ohio-based firm is a distinct segment participant within the quick rising electrical automobile sector, specializing in electrical powered supply and utility automobiles. It’s a technique that has, up to now, paid off for the corporate and its shareholders.
Supply: Photograph from WorkHorse.com
Workhorse stock has risen greater than 700% this 12 months, a staggering quantity by any metric. The share price has rocketed to a excessive of $30.99 in September from $1.47. Whereas the stock has since given up a few of these good points, it’s at present buying and selling at round $25 a share.
A lot of the expansion has come from the great run up of stocks which can be a part of the broader electrical automobile sector, led by Tesla (NASDAQ:TSLA), leaving buyers questioning if Workhorse Group can broaden past its area of interest give attention to industrial automobiles and preserve its torrid tempo?
WKHS Stock Is a Contender
Workhorse Group is a small firm that’s competing for some large contracts. Most spectacular, the corporate is at present on the shortlist for a U.S. Postal Service contract to buy 180,000 new vans to improve its nationwide supply fleet. Workhorse is on a shortlist of simply three firms to win the profitable Postal Service contract, estimated to be worth $6.three billion. The opposite two firms on the record are Morgan Olson and an alliance between Ford Motor Co. (NYSE:F) and Oshkosh (NYSE:OSK).
Whereas Workhorse Group is considered because the underdog within the U.S. Postal Service contract lottery, the truth that the corporate is on the shortlist ought to be considered as a vote of confidence (the unique record of bidders totaled 15 firms). Many analysts really feel that Workhorse Group is one large contract win away from outperforming electrical automobile leaders resembling Tesla.
The Metropolis of Orlando, Florida can also be reported to be contemplating buying Workhorse Group’s electrical utility vans. Workhorse is in talks with Basic Motors (NYSE:GM) to takeover the Lordstown Meeting plant, a 6.2 million sq. foot manufacturing plant positioned in Lordstown, Ohio that Workhorse at present has a 10% stake in.
Earnings Stay Elusive
Whereas Workhorse Group’s supply and utility automobiles are attracting consideration, the corporate has but to land any main contracts and stays unprofitable. A lot of the carry in Workhorse stock is because of the truth that buyers are snapping up shares of any and all electrical automobile firms, no matter the place they’re at when it comes to manufacturing and delivering cars.
Along with Workhorse Group and Tesla, different electrical automobile stocks which have had large runs this 12 months embody Nio (NYSE:NIO) and Nikola (NASDAQ:NKLA).
Whereas a rising tide appears to be lifting all boats, it’s worth noting that Workhorse Group has been round since 1998 and have become a publicly traded firm in 2010. It’s not a flash within the pan. Nonetheless, its area of interest give attention to industrial electrical automobiles may restrict its potential market at a time when it’s going through rising competitors.
The electrical automobile market has been rising exponentially in recent times and there are anticipated to be greater than 250 million electrical automobiles pushed world wide by 2030, in keeping with the Worldwide Power Company (IEA). By some estimates, there are anticipated to be greater than 100 totally different electrical automobile models accessible on the market within the U.S. by 2024 as main automotive manufactures resembling GM, Volkswagen (ETR: VOW3) and Nissan (OTCMKTS:NSANY) ramp up plans to supply each industrial and shopper electrical automobiles. The competitors Workhorse Group faces is barely going to develop into extra fierce in coming years.
Wait For Stronger Fundamentals
In its most up-to-date quarterly outcomes ended June 30, Workhorse Group reported income of simply $92,000 and working bills of $5.57 million. The corporate’s internet loss was $131 million, largely as a consequence of elevated curiosity bills of $124.three million. These aren’t encouraging outcomes and present clearly that Workhorse stays in start-up mode. There was some hypothesis that the corporate is likely to be focused for a takeover by a bigger, extra established automaker.
Given its lack of viable contracts and manufacturing in addition to its poor monetary outcomes, buyers can be finest suggested to keep away from Workhorse stock in the interim. There are too many different extra established electrical automobile makers and automotive firms accessible for buyers to threat their hard-earned cash on.
If the corporate wins the U.S. Postal Service contract or issues change for the corporate in one other basic approach, then by all means think about shopping for shares. Till then, keep away from Workhorse Group.
On the date of publication, Joel Baglole held shares of TSLA.
