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WKHS Stock will bask in the success of Lordstown Motors-DiamondPeak merger
By Louis Navellier and the InvestorPlace Research Staff, Editor, Growth Investor Oct 9, 2020, 12:03 pm EDT
I’ve written before on why Workhorse (NASDAQ:WKHS) is a buy. In particular, the affordability of WKHS stock — and its effort to win a $6 billion contract from the U.S. Postal Service — makes the company an attractive prospect.
Source: Photo from WorkHorse.com
But there’s another reason to like Workhorse that investors should consider — it involves a special purpose acquisition company and Lordstown Motors.
WKHS Stock and the Lordstown Effect
Workhorse has a 10% stake in Lordstown, which owns a plant in Ohio and is planning to go public with the help of blank-check company DiamondPeak Holdings(NASDAQ:DPHC).
Lordstown’s top product — the Endurance pickup truck — is expected to be in production next year. The vehicle features 20-inch wheels and 7,500 pounds of towing capacity. And it’s going to make a lot of money.
Already, Lordstown has received more than 40,000 orders for the Endurance. The orders account to over $2 billion in potential truck sales — a nice profit already, if all the sales go through.
And I expect that success will be reflected in WKHS stock, too. Lordstown and DiamondPeak’s newly combined company will begin trading on the Nasdaq via the ticker symbol RIDE.
What’s more, Lordstown is headed by Workhorse’s former CEO, Steve Burns. As part of the company’s investment, WKHS locked in an agreement that protects its shares from dilution for the next two years. It also gets a 1% fee on any debt and equity raised for Lordstown over those two years.
Lordstown is expected to be valued at $1.6 billion when it goes public. This puts Workhorse’s stake at a cool $160 million.
I like this deal a lot. In fact, here’s what I wrote about the merger in September:
“Lordstown Motors is perfectly capable of executing even in a field populated with other electric truck companies. … Doubters can sit on the sidelines if they want, but they won’t get to participate in the growth story of this exciting electric vehicle upstart.”
Because the company’s stake is so sizable, investing in WKHS stock now gives investors another way to profit from the new merger.
LOUIS NAVELLIER: MY #1 STOCK FOR 2020
Don’t Forget About the USPS
If the merger news hasn’t convinced you, though, what might is this: Workhorse’s piece of the electric vehicle (EV) space is in battery-powered EVs, with a special emphasis on delivery fleets. In fact, the company built its C650 and C1000 vans with last-mile delivery in mind.
Don’t forget — the demand for last-mile delivery solutions is only going to increase as e-commerce becomes the preferred way to shop, both during and after the novel coronavirus pandemic.
Technavio, a research company, says that the compound annual growth rate in the last-mile delivery market in North America is expected to rise more than 14% from 2020 to 2024.
The U.S. Postal Service is one of the biggest players in last-mile delivery, and its planning to replace aging, gas-powered delivery vehicles with 140,000 new vans.
Workhorse is one of three remaining finalists for that $6 billion contract. And it’s the only one offering a pure, battery-powered electric option. The company’s vans sport lower maintenance costs, lower fuel costs, zero emissions and no noise. That should give WKHS a competitive advantage in landing the USPS contract.
All this in mind, investors are optimistic. For the year, WKHS stock is up more than 700%.
Bottom Line
There’s no doubt that the electric vehicle space is starting to get crowded. But Workhorse gives investors a solid avenue to play it, with an emphasis on fleets and last-mile delivery solutions. When combined with its 10% stake in the up-and-coming Lordstown Motors, there are plenty of reasons to like WHKS stock right now.
Currently, both Workhorse and DiamondPeak have an “A” rating in my Portfolio Grader.