Workhorse (NASDAQ:WKHS) investors are gearing up for an announcement from the United Stated Postal service (USPS) regarding their $6 Billion deal to revamp their delivery vehicles. WKHS surged 12.62% on Friday as Roth Capital analyst Craig Irwin noted that Workhorse was best fit for the USPS deal. Workhorse is the only contender for the deal offering an EV solution, which would aim to slash long term USPS maintenance costs.
The announcement is speculated for the 13th of October, which USPS may announce the winner or winners of the Next Generation Delivery Vehicle deal. Interestingly, the Moving Forward act passed by Congress will require USPS to replace 75% of their existing vehicles with EV or zero carbon alternatives. The bill will also prohibit USPS in purchasing the current delivery vehicle models (Grumman Long Life Vehicle) by 2040. This article will breakdown all the key information you need to know as we edge closer to the announcement date.
- USPS speculated to announce the winner for the Next Generation Delivery Vehicle deal on the 13th of October 2020 (not confirmed by USPS, only speculation).
- The deal initially was announced for $6 billion however sources have projected the costings to be in the ball park of $8.1 billion (See source here)
- Recently passed Congress bill, The Moving Forward act shows positive positioning for Workhorse in the USPS deal. The act will put pressure on USPS to upgrade their delivery vehicles to a Zero Carbon solution.
- Analysts argue that the WKHS stock has already “priced in” the potential USPS deal, however the Bulls believe the upside potential from the announcement will remain exponential.
Who are Workhorse’s competitors for the USPS deal?
Workhorse is one of three remaining contenders for the award. Details regarding the current prototypes haven’t been disclosed in full detail yet. From what we know Workhorse is the only competitor offering a complete EV transport prototype. According to linked sources the Karsan/Morgan Olsan is a hybrid prototype and Ford/Oshkosh is completely diesel.
A hybrid delivery vehicle designed by Karsan Otomotive and manufactured by USPS longstanding business partner Morgan Olsen. The prototype delivery van is to operate with two ports, one for convential petroleum and the other a plug-in for electricity. See the full prototype details here.The strong business relationship built between Morgan Olsan and USPS does pose a threat to Workhorse investors.
The current transport van prototype is to run on diesel and incorporate a Ford Transit body. Ford is one of the largest vechile manufacturers in the world, boasting a $28 billion market cap. See the full prototype details here. If Oshkosh/Ford are putting forward a diesel prototype, the Moving Forward Act may have an external impact on USPS decision. However, Ford have gigantic manufacturing capabilities of which outnumbers Workhorse tremendously.
How volatility will impact WKHS next week?
Before I begin, I remind our viewers that this is not financial advice. Instead, the information is investment commentary from extensive research.
After months of speculation surrounding the USPS deal, investors are eager for an announcement next week. The market will have one day prior to the speculated announcement, which pre-market suggests speculators are keen on making a bet on the deal. From my experience in trading during this period, good news won’t reflect on the stock price for very long. What we are seeing is large amounts of speculators jumping between announcements. We know after the announcement, if Workhorse are unsuccessful then the stock will deduct its “priced in” value which may be detrimental.
If Workhorse land this deal, analysts expect the stock to explode. However, timing during highly volatile situations will deduct some of the associated risk (opinion not advice). As we know many speculators are relying on positive news, and we can conclude positive news will only delay the volume of speculators cashing inAnother popular scenario is that USPS will further delay the announcement or not announce any progression on the deal at all. This could see speculators shed their holdings immediately and the stock price feeling a strong hit.
There is no doubt this will be a mammoth week for WKHS investors, and we will continue to cover the events as they unfold this week.
Disclaimer: The author of this article is currently holding a short term position in Workhorse (NASDAQ:WKHS) at $24.45 a share. Please read our disclaimer and disclosure below for more information.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Tyger Fitzpatrick, Founder of YIG.