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Workhorse shares collapse, all eyes now on Q4 results

Electric vehicle startup Workhorse, set to report quarterly results on Monday, remains optimistic on its growth potential after losing a key contract.

  • Workhorse Group, Inc (Nasdaq: WKHS) share price slumped 50.9% last week to US$16.17 per share
  • Its proposal for a big Postal Service contract was rejected
  • The contract loss prompted some analysts to lower their target prices
  • The electric vehicle (EV) maker is due to report its Q4 and full-year 2020 results on Monday (01 March 2021)
  • Trade Workhorse shares, long or short, with an IG account

Why did Workhorse shares slide?

Shares of electric vehicle maker Workhorse slid 14.3% on the day to finish Friday (26 February) at US$16.17. That’s a 50.9% plunge in value from the week prior, marking the stock’s all-time biggest weekly rout.

News that the startup lost a major contract from the US Postal Service (USPS) surprised the market and eroded investor sentiment.

USPS last Tuesday announced it awarded the deal to build vehicles for mail carriers, to Oshkosh Corp. The overall contract could be worth over US$6 billion in total.

On Thursday, the shares’ losing streak paused briefly, rising 23.3% day-on-day, after a congressman said he would seek to reverse the outcome. Workhorse also plans to fight the decision and ‘intends to explore all avenues’ available to non-awarded finalists in a government bidding process.

Analysts cut targets after ‘shocking’ news

Some analysts thought Workhorse would win at least part of the deal, as it aims to make electric delivery vans for firms like FedEx and United Parcel Service.

Roth Capital Partners’ Craig Irwin described the USPS situation as ‘downright shocking’ and ‘outrageous’; he lowered his Workhorse share price target to US$18, from US$25. Colliers Securities analyst Michael Shlisky said it was ‘really bad news for recent Workhorse investors’.

As of Saturday, three research teams had ‘buy’ calls, four recommended ‘hold’, and one rated the stock ‘sell’. Their average price target was US$17.04 per share, according to Bloomberg data.

Cowen & Co analyst Jeffrey Osborne kept an ‘outperform’ rating but lowered his target to US$18 from US$25. Two analysts - Colliers Securities’ Shlisky and Roth Capital’s Irwin - each maintained their ‘neutral’ recommendations, while Oppenheimer & Co downgraded the stock to ‘market perform’.

BTIG was one of the most bullish, reiterating its ‘buy’ call on Wednesday but shaved its target to US$24 from US$26. The most bearish was Vertical Group with a US$5.25 target and a ‘sell’ recommendation.

Other revenue streams?

On Monday (01 March 2021), it will report its fourth-quarter and full-year 2020 financial results.

Following the USPS news, analysts are turning their focus to other possible revenue sources. RF Lafferty noted it will look at potential orders from new and existing customers, as well as the cash burn rate.

The average analyst estimate is for an adjusted loss of US$0.14 per share and US$1.2 million in revenue for Q4 2020, based on Bloomberg data.

The company’s CFO, Steve Schrader, said there remained plenty of growth potential in selling electric delivery trucks to shipping companies. Workhorse has orders for 8,000 such trucks.

The startup also plans to ramp up production, and aims to make 1,800 vehicles this year, Schrader added.

Workhorse could soon find it more difficult to hold on to its investors if they viewed its growth narrative as faltering, Bloomberg reported.

How to trade Workhorse stocks with IG

Are you feeling bullish or bearish on Workhorse stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like spread bets or CFDs offered on IG's industry-leading trading platform, or by investing in the share directly from zero commission, in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Workhorse Group> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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