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Should You Bet on Workhorse Stock in the Hot EV Market?


Jun. 29 2020, Published 11:15 a.m. ET

Since the EV trend has been getting hotter every day, many new stocks have been catching investors’ attention. Workhorse (NASDAQ:WKHS) is one of the hot EV (electric vehicle) stocks. The company was founded in 2007 under the name “AMP Electric Vehicles.” The company started focusing on commercial vehicles in 2010. In 2016, the company got listed on NASDAQ under the name “Workhorse.”

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Why EV stocks are on fire

So far, 2020 has been a very good year for EVs. Due to the lack of returns in the broader markets, investors have been looking for companies with great future potential that offer a sustainable future. Electric vehicle makers are one such group. As a result, EV stocks have been rising Tesla (NASDAQ:TSLA) and NIO (NYSE:NIO) have returned 130% and 72% YTD, respectively. Nikola (NASDAQ:NKLA) has risen 87% after starting its life as a public company on June 3. Workhorse stock has gained a whopping 226% this year.

Workhorse operates in a niche category

While Workhorse also makes EVs, it operates in a different niche. The company focuses on last-mile delivery. Workhorse is the only pure-play OEM (original equipment manufacturer) in medium-duty electrification. The company thinks that this niche is an $18 billion annual market opportunity.

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Strong customer and partner base for Workhorse

Workhorse already counts UPS (NYSE:UPS), FedEx (NYSE:FDX), and Ryder among its partners and customers. The company operates with the promise of green and cost-effective solutions to companies’ delivery issues. For example, the company mentioned that its operating cost is close to $0.36 per mile. In comparison, the industry’s operating cost is $1.00 per mile. Workhorse has a delivery target of 300–400 vehicles in 2020.

Lordstown Motor unveils “Endurance”

On June 23, the company hit a major milestone and got approval from federal safety standards. With this approval, the company is positioned for its production timeline. Investors have also been watching the company’s 10% stake in Lordstown Motor, which is a privately-held EV startup. Lordstown Motor unveiled its new electric light-duty pickup truck, Endurance, on June 25. The event, which also featured Vice President Mike Pence, generated a lot of interest among investors and analysts.

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Analysts recommend a “buy” for Workhorse

Currently, four analysts cover Workhorse stock. All of the analysts recommend a “buy” for the stock. The mean target price represents an upside potential of 12%. On June 26, Cowen analyst Jeffrey Osborne increased the target price for Workhorse stock from $4.5 to $11.5. He thinks that the company deserves a higher valuation.

Should you buy into the current EV trend?

EVs look like the future of the auto industry. However, there’s a problem when calculating how much to pay for the expected growth. Most of the companies don’t have a single vehicle on the market yet. The stocks have been rising. Investors have been looking for EV plays to bet on this hot trend. The fear of missing out has also been a factor as the EV trend gets hotter this year. While Workhorse has shown initial promise and the niche factor is strong, investors should wait for pullbacks instead of going with the momentum.


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