Workhorse (NASDAQ:WKHS) stock has been trading for the past decade or so. But it did not get much attention until this year. Consider that WKHS stock has soared from $1.32 to a high of $30.99. That is an impressive run!
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However, investors should note that shares have backed off. They are now at $22.
Workhorse is the developer of electric vehicles for last-mile delivery. The company got its start back in 2007 and was called AMP Electric Vehicles. At first, the focus was on developing EVs for two-seat roadsters. But the company would eventually pivot to create trucks and vans for commercial purposes.
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A big part of this involved a merger with Workhorse Custom Chassis, which was founded in 1998. The company was the developer of General Motors’ (NYSE:GM) chasses. As a result, the merger allowed for the new entity — Workhorse — to become a full-blown manufacturer.
WKHS Stock: All About the Vehicles
Workhorse’s C650 and C1000 step vans have a modular battery pack system, which has 35 to 70 kilowatt hours of power and 100-mile ranges. There is also a proprietary telematics system to track and monitor the performance and optimize the routes. Workhorse estimates that its vehicles have 60% less maintenance expense versus fossil-fueled trucks. This could translate into $170,000 in savings over a 20-year period. Because of the strong return on investment, the company has taken a premium pricing model.
So far, there are over Workhorse 400 vehicles on the road. But there is likely to be significant growth in the coming years.
One of the catalysts is the U.S. Postal Service, which is in the process of upgrading its fleet of 165,000 vehicles and the contract could be worth over $6 billion. As for Workhorse, it is among the three bidders left.
It’s far from clear how things may turn out. Let’s face it, the federal government can be slow and there will be considerable lobbying. But given the ROI of Workhorse vehicles, it does seem reasonable that the company has a decent chance of being the winner — or at least having some role in the contract.
If so, this would certainly be a game changer. It would likely encourage other large customers, like Amazon (NASDAQ:AMZN), United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX), to consider Workhorse vehicles for large deployments.
The Lordstown Motors Catalyst
But this is not the only major catalyst for WKHS stock. Keep in mind that the company has a 10% equity stake in Lordstown Motors. The company develops EV pick-up trucks at a former GM factory. Next year, Lordstown Motors plans to begin the rollout of its vehicles — and there are already orders for $2 billion.
Oh, and the company is coming public through a special purpose acquisition company. This is a corporation that raises money through an IPO and then merges with an operating company.
As for Lordstown Motors, it is looking to merge with the DiamondPeak Holdings (NASDAQ:DPHC) SPAC. In other words, this could represent a valuable asset for Workhorse’s balance sheet.
Bottom Line on WKHS Stock
What if the company does not win the U.S. Post Office contract? Yes, it would be a major setback. This is perhaps the biggest near-term risk. Yet it would not be existential for the company.
With the surge in the growth of e-commerce, there is a need for more cost-effective last-mile delivery vehicles. And yes, Workhorse is a pretty good option. It is also important that the company’s vehicles are not just a concept. Workhorse does have contracts — albeit relatively small — with companies like Ryder (NYSE:R).
Although for now, when it comes to WKHS stock, it still does look like a speculation, given the U.S. Postal Service contract and its high valuation. Thus, if you do make an investment, it’s probably best to not get too aggressive. After all, if things pan out, the return should be substantial anyway.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.
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