Why is Workhorse rising?
Electric van maker Workhorse Group’s shares jumped after it sued to block a truck contract that the postal service provider awarded to a rival.
- Workhorse Group Inc (Nasdaq: WKHS) share price soars to US$14.90 per share
- It filed a legal suit against a USPS decision on a US$6 billion contract
- BTIG analysts flagged potential supply-chain issues for the EV startup
- Ready to trade Workhorse shares? Open an account with us today
Workhorse stock pops after suing US Postal Service
News that Workhorse Group would be challenging its loss of a hefty, long-term contract from US Postal Service (USPS) helped to power the electric vehicle (EV) startup’s shares on Wednesday.
The WKHS counter, dubbed a ‘meme stock’, jumped 5.3% to close at US$14.90, on a heavy volume of 38.3 million shares.
The electric automaker’s stock has almost doubled over the past month, soaring 80.6% since mid-May 2021. Its explosive trading volumes have been attributed to social media buzz
Speculative frenzy among Reddit-favourite names, including Workhorse, was ‘especially pronounced as a broader stock market has not gone anywhere for most of the past month’, Bloomberg noted.
The company on Wednesday filed a bid protest in the US Court of Federal Claims, under seal, to block the procurement process that USPS awarded to Oshkosh Defense, Reuters reported.
A judge will likely unseal a version of the complaint in the coming weeks, Reuters added.
Why is Workhorse challenging the USPS decision?
In February, Workhorse failed to clinch a multibillion-dollar, 10-year contract to manufacture a new generation of mail trucks for USPS.
The project was instead bagged by its competitor Oshkosh Defence, which designs and produces military vehicles and mobility systems.
The US$6 billion contract covers 50,000 to 165,000 postal delivery vehicles - with a mix of internal combustion-powered and battery-electric vehicles - over a decade.
Workhorse’s proposal was to build an all-electric truck fleet for USPS. The plan had won the support of many US lawmakers, Reuters reported.
USPS declined to comment on Workhorse’s legal challenge, but said that the ‘pre-production design, tooling and facility preparation are proceeding on schedule with the first (next-generation delivery vehicles) estimated to appear on carrier routes in 2023’.
What is the outlook on Workhorse?
Research teams were largely neutral on WKHS shares, with five recommending ‘hold’, two suggesting ‘buy’, and one giving a ‘sell’ call. They had an average 12-month target price of US$11.84 as of Wednesday, according to Bloomberg data.
Last week, Cowen rated WKHS ‘market perform’ and eyed a US$13 target.
BTIG analysts, recommending ‘buy’, recently wrote that Workhorse is ‘solidifying its position as a leading US commercial electric vehicle manufacturer’ and is positioned to benefit from the ongoing secular transition, with the industry evolving to use cleaner energy.
However, the company may face potential supply-chain issues and a slower-than-expected vehicle production ramp, BTIG said.
‘While we continue to like WKHS’s position as a first-mover in the last-mile delivery space, EV penetration continues to muddle along in fits and starts’, BTIG added.
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