Tip Ranks
There’s no need to catch the workhorse’s falling blade, analyst says
The wheels came off the bull cart for Workhorse (WKHS) on Tuesday. After several delays and months of speculation, the US Postal Service finally came to a decision on who would go for the coveted contract to renew its obsolete van fleet. It wasn’t Workhorse. The 10-year $ 482 million contract was awarded to Oshkosh, who will now be responsible for assembling 50,000 to 165,000 Next Generation Delivery Vehicle (NGDVs). Investors in the electric delivery van start-up dropped shares 52% in the past two trading sessions. The rejection is a huge blow to Workhorse, who was considered the front runner for the award. The contract, which was expected to significantly increase production numbers, was seen as an important catalyst in moving the company forward. So what now? Colliers analyst Michael Shlisky says “investors may have been bitten by a snake for a while.” “Importantly,” said the analyst, “We never included the USPS request for proposal (RFP) in our WKHS valuation simply because the award was always uncertain; as such, we are not changing our estimates at this point.” disappointment from the USPS, other questions remain ahead of Workhorse’s fourth-quarter results (3/1). The company has said production output would be weak in the fourth quarter due to increased COVID-19 cases, battery power issues, hiring delays, and the implementation of improvements on the production floor. Shlisky would like to know if production issues have been resolved and if the company is still on track to produce 100 vehicles per month by the end of the first quarter. The other major problem concerns the increasing competition in the last mile segment. Namely, how does Workhorse think it will stand out in the increasingly crowded space? Ford has announced its E-Transit model as expected, but General Motors has also announced the launch of a potential competitor to the Workhorse C-650, the BrightDrop. Additionally, Xos Trucks has just announced that it will go public through a SPAC merger, as has Ree Auto, which is suitable for all types of Class 1-7 commercial vehicles and is expected to bring in $ 436 million for its own SPAC merger transaction. “Coupled with the mixed reads we received at best,” said Shlisky, “we believe this is not the time to jump on the long side for WKHS.” Accordingly, the analyst rates WKHS as Neutral (i.e. Hold), without proposing a price target. (To view Shlisky’s track record, click here) Shlisky’s colleagues do have a price prediction, however, and after Tuesday’s massive drop, the Street $ 22 average price target could yield ~ 47% gains over the next year. The analysts’ consensus rates the stock as a moderate buy, based on 3 buys and holdings each. (See WKHS Stock Analysis on TipRanks) To find great ideas for EV stocks trading at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ insights into stocks. Disclaimer: The opinions expressed in this article are solely those of the Recommended Analyst. The content is provided for informational purposes only. It is very important to conduct your own analysis before making an investment.