Is It Time to End the Debate About Workhorse Stock?

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As electric vehicles become a non-partisan issue, the electric bubble may hold some air

The first time I wrote about Workhorse Group (NASDAQ:WKHS), the stock was trading at around $16. At the time, I felt that Workhorse looked like an interesting opportunity, but seemed like it was no longer a value.

Image of a Workhorse (WKHS) logo and drone on the side of a truck.

Source: Photo from

One reason for that was that the company has a lot of purchase intention. But intent doesn’t mean revenue. I have to agree with many of my InvestorPlace colleagues when I say we are in an electric vehicle (EV) bubble.

However that was 58% ago. That’s how far the stock has climbed in just over a month. And that’s during a stock market sell-off. One reason for this may be that EVs are going mainstream.

The Environment Is Becoming Bi-Partisan

For a moment, I need to comment on the Kabuki theater that passed for a presidential debate. I noticed something interesting that makes me very bullish on Workhorse stock. For those of you who suffered through the debate, I’m wondering if you noticed it, too.

If you stuck with the debate until the last 15 minutes (and I admit to flipping back and forth by that point) a strange thing happened. Well, strange for how abnormal normal it felt. When the subject came to the environment and climate change, President Donald Trump and former Vice President Joe Biden almost (and I emphasize almost) stopped the juvenile sparring and stated their positions with some degree of clarity. (Though moderator Chris Wallace had to ask President Trump three times on the subject before getting a direct answer.)

And here’s where it gets intriguing to me. For the first time that I can remember, the issue was not a Democrat issue or a Republican issue. The differences were in how each viewed climate change and how far they were willing to go to combat it.

Which brings me back to Workhorse, but I might as well be talking about any of the electric vehicle manufacturers. If the debate is any indication, the conversation is moving away from “either/or” and moving to a “both/and” discussion. That bodes very well for EVs in general.

A Small But Viable Niche

One thing that intrigues me about Workhorse is that it is focusing on a specific niche. In this case, Workhorse helps manufacture battery-electric commercial delivery and utility vehicles. Granted, it’s a small niche at the moment. The company has only put about 400 vehicles on the road.

And the company has the lack of revenue to show for it. In the last quarter, Workhorse generated only $92,000 in sales. Workhorse has also recorded less than $1 million in revenue in each of the last two years.

That could be changing. First, a 2019 Mortenson survey quotes delivery fleet owners as saying they expect their fleet to jump 50% from today’s 23% in five years. Workhorse would seem to be able to benefit from that. The company has the ability to scale its manufacturing through a 265,000 square foot plant.

First, the company does have a small partnership with Ryder (NYSE:R). It has small contracts with UPS (NYSE:UPS) and Federal Express (NYSE:FDX). But the big prize is a potential contract that Workhorse has with the United States Postal Service (USPS).

The USPS is looking to upgrade its truck fleet that has an average age of 27 years. That is three years past the intended maximum lifespan of the aluminum bodies. The postal service plans to purchase up to 180,000 trucks at a cost of $25,000 to $30,000. The total potential value of the contract is pegged at around $6.3 billion.

The Fundamentals Still Don’t Add Up for WKHS Stock

My colleague Alex Sirois wrote recently that investors don’t seem to care about the bleak state of Workhorse’s fundamentals. As I wrote above, the company had just $92,000 in revenue in the last quarter. That’s probably because the company will receive a transfusion of cash when Lordstown Motors goes public through its reverse merger with DiamondPeak Holdings (NASDAQ:DPHC).

And as Luke Lango wrote recently, Workhorse stock is a long-term bet on the demand for EVs for the last mile delivery. Workhorse is positioned to capture its share of this market as it expands over the next 10 years.

The USPS contract would be big news, but that’s not a sure thing. If Workhorse gets even a piece of that contract, then it’s likely that the private sector delivery companies will elevate their EV commitment to follow suit.

I still think Workhorse stock is overvalued right now, but that’s not an issue that investors seem to want to debate. If you have the risk appetite, Workhorse stock should pay off in the long term.

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