Shares in Workhorse Group (NASDAQ:WKHS) WKHS stock are up 82% in 2021 thanks mainly to the Post Office.
I called Workhorse a bubble stock in September, but sort of retracted that two months later. That’s because its business strategy is targeting one big contract from one big customer, that it just might sign.
That customer is the U.S. Postal Service, which wants to replace its 140,000 gas-powered delivery wagons. Workhorse is one of three finalists for the order. Neither of the other two is offering a pure electric like Workhorse’s C-Series.
Then there’s President Joe Biden.
WKHS Stock and the Biden Electric Call
The Postal contract is worth over $6 billion, and the new President’s Jan. 25 “Buy American” executive order seems to play right into Workhorse’s hands. Our Luke Lango sees Workhorse winning the contract.
Workhorse has two vans that seem perfect for the job, the C-650 and C-1000. It has also been in business since 2007, as AMP Electric Vehicles. It works out of a plant once used by General Motors (NYSE:GM) and, later, by Navistar International (NYSE:NAV).
Competition for the Postal Service contract is most intense from Oshkosh (NYSE:OSH), formerly Oshkosh Truck, which has teamed up with Ford Motor (NYSE:F). The original bid was for a gas-powered truck, but Oshkosh now says it’s “ready to pivot” to electrics if it wins the deal. A decision could come next month.
Even without the Postal Service, Workhorse is doing deals. Privately held Pride Group Enterprises, based in Canada, has signed a deal to buy 6,320 C-Series vehicles. The Pride order represents more trucks than Workhorse had originally planned to build in 2021. The order, however, runs through 2026. Workhorse also has a deal for 500 electrics with Prichard Companies, a large industrial dealer in Iowa.
The main risk in Workhorse, then, seems to be its ability to scale production.
The Big Metal Threat
Until recently electric delivery looked like a game for start-ups. But Detroit, and the market’s customers, have changed the game.
Ford wasn’t on the Oshkosh bid until recently. GM has now launched an electric van company called BrightDrop, estimating this will be an $850 billion market in 2025.
Both GM and Ford pale in comparison to Amazon (NASDAQ:AMZN), which has ordered 100,000 electric vans from privately-held Rivian, and invested $700 million in the company.
UPS (NYSE:UPS) has also committed to buying 10,000 electrics and invested in their maker, Arrival, which is going public through a Special Purpose Acquisition Company (SPAC) called CIIG Merger (NASDAQ:CIIG).
The moves validate the idea that America’s delivery fleet is going electric, and quickly. On the other hand, such big deals require quick scaling, something Workhorse doesn’t have.
That’s why our Chris Lau says Workhorse is under pressure to do multiple deals this year. About 31% of Workhorse stock is now sold short, he writes, as investors bet that it will be stomped on by bigger companies.
The Bottom Line
When Workhorse sold off in November, after the Postal Service delayed its order, Cathie Wood of ARK Investments bought in for her ARK Autonomous Technology & Robotics ETF (BATS:ARTQ).
Wood has jumped out of the pack of Wall Street managers with her ARK ETFs, which are focused on disruptive technology. Her fund’s purchase doesn’t guarantee that Workhorse will win the game. But it’s a good indication that it’s in the game.
This stock is still a speculation. But its odds of success from its present market cap of $4.4 billion have risen since November. A single big deal could justify that valuation. There are several out there. Buying Workhorse today means betting on its executives, not its technology or its factory.
At the time of publication, Dana Blankenhorn directly owned shares in AMZN.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at [email protected], tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.