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Will electric delivery vehicles drive up Workhorse’s share price?

Workhorse’s [WKHS] share price has been hobbled in 2021 so far, dropping 33.3% for the year to 7 April. Workhorse’s share price saw gains in the first month of the year, hitting an all-time high of $42.96 on 4 February during intraday trading.

However, a decline over the following weeks saw Workhorse’s share price fall 27.1% to close 22 February at $31.34, before a single-day fall of 47.4% on 23 February saw it crash to $16.47 within 24 hours.

The electric delivery vehicle manufacturer has seen its stock dwindle further through late March and early April. However, investors will note that, for all its recent struggles, Workhorse’s share price closed 7 April 690.4% above its price 12 months prior.

690.4%

Workhorse's 12-month gains

 

Pipped to the post

Workhorse’s stock was recently boosted by its surprise inclusion in Ark Invest’s new space fund, the ARK Space Exploration & Innovation ETF [ARKX].

Workhorse has plans to begin using drones to deliver goods alongside its electric vans. This makes it fair game for the ETF, which focuses on companies involved in “technologically enabled products and/or services that occur beyond the surface of the Earth”. These include “aerospace beneficiary companies” benefiting from a range of airborne technologies, including drones.

However, a decision on 23 February by the United States Postal Service (USPS) to award a lucrative contract to rivals Oshkosh [OSK] rather than Workhorse, as the company had expected, looks set to cause added misery.

This comes in the form of a class action lawsuit by Kessler Topaz Meltzer & Check. The law firm announced the suit against Workhorse on behalf of shareholders who bought shares in the company. This is based on what it describes as “false and/or misleading statements” indicating that Workhorse would win the contract ahead of the USPS announcement.

 

Why the long face?

It’s not all doom and gloom for Workhorse. There has already been a push back against the USPS contract decision. The agreement with Oshkosh only stipulates 10% of the new fleet must be electric vehicles (EVs), which many believe breaches US president Joe Biden’s commitment to replace the US government’s fleet with EVs. It is unlikely, but possible, that some or all of a revised contract could be awarded to Workhorse, should the EV quota be increased.

In January, Pride Group Enterprises submitted a purchase order for 6,320 C-series electric delivery vehicles, including Workhorse’s C-1000 and C-650 models. This took the total backlog for the company to 8,000 vehicles, which includes outstanding orders from United Parcel Service [UPS], Deutsche Post DHL [DPW.DE] and Pritchard Companies. The Pritchard and Pride orders combined represent over $600m in backlog orders, according to Seeking Alpha.

8000 vehicles

Total order backlog in January

As other US delivery giants — including the likes of FedEx [FDX] and DHL look to update their fleets with new EVs, there is a sizeable addressable market for Workhorse to chase in the coming years, as long as it can maintain efforts to speed up its production to 10 vehicles per day by the end of Q2 2021.

 

The EV ETF field

Workhorse is not the only beast in the EV field and it will face stiff competition in the race to capture the growing electric delivery vehicle market. The EV market as a whole is enjoying a period of strong performance.

As of 7 April, Workhorse was a long way down the holdings of SPDR S&P Kensho Smart Mobility ETF [HAIL], coming in at number 51 with a weighting of 1.10%. The fund has gained 12.2% so far in 2021, and 190.2% in the past 12 months (as of 7 April’s close).

The ETF’s larger constituents indicate the competition Workhorse is up against. These include General Motors [GM], HAIL’s fourth-largest holding at 2.41% of the fund, which made a statement of its intent in the electric truck space at the start of 2021 after revealing its planned GMC Hummer EV. Meanwhile, the company’s BrightDrop EV600 encroaches directly on Workhorse’s electric delivery vehicle market.

Similarly, Ford, which comes sixth on the list of HAIL holdings at 2.37% of the fund, revealed the all-electric version of its Transit van in November. While the E-Transit’s range is limited to 126 miles, a $45,000 price tag will worry competitors upon its release in 2022.

Disclaimer Past performance is not a reliable indicator of future results.

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