Workhorse (NASDAQ:WKHS) took a 15% hit last week as the EV industry including Tesla struggled to gain any traction on Wallstreet. The stock corrected from its standing equilibrium at $23-24 to $19.20 with no associated news. Workhorse has since rebounded above the $20 mark however continues to experience unusually low volumes suggesting a large bounce is unlikely this week. WKHS has not traded below $20 since early September, which poses the question is now the time to capitalise on this price? This article will breakdown all the key information you need to know about WKHS and its current price.
Workhorse stock pushed under 12 month price targets
Some investors who held Workhorse through last weeks dip took the opportunity to buy WKHS under $20, trimming down their average price. The stock price before the correction was on par or above average 12 month price targets published by analysts. However, the correction has meant WKHS is now trading well under the average 12 month price targets and translating this with more upside potential.
The 12 month price targets from 3 analysts according to NASDAQ data, show the average 12 month price target at $23.33 which is a 14% upside. In comparison, CNN data from 4 analysts suggest a median 12 month price target at $26. This represents an upside potential of 27% from the current price. At the current price, the risk positioning based on averaged price targets has significantly improved for Workhorse investors.
What the 10% ownership in Lordstown Motors means for WKHS?
The Lordstown ticker (NASDAQ:RIDE) is to take effect on Monday 26th October after concluding its lengthy merger with its SPAC counterpart DiamondPeak Holdings. The merger is to generate Lordstown $675 million in funding to kickstart its production of the Endurance pick-up truck model. Workhorse entered a deal with Lordstown Motors which affirmed they would own 10% of the company if Lordstown is able to acquire WKHS’s intellectual property on its pick-up truck designs. See full details on the deal here
“This long-term partnership allows Workhorse to benefit by both monetizing our existing technology and participating in the upside potential of this new venture without prohibitively diluting our existing shareholders. Having an affiliated company with significant automotive production capacity also provides us with beneficial manufacturing footprint options in the future, should Workhorse win substantially larger contracts as we scale our operations”
Workhorse CEO Duane Hughes on Lordstown deal, see full report.
The terms of this deal significantly benefit Workhorse in the medium to long term. According to the terms, Workhorse is entitled to a license fee equal to 1% of the gross sales price of each Lordstown Endurance truck sold for the first 200,000 units. The deal for Workhorse will continue to improve Cash Flow within the business. Hence allowing for expansion in operations and a healthier balance sheet.
Workhorse stock forecasts for 2021 and beyond
Firstly, the current revenue forecasts published by analysts for 2021 are Bullish. The 2021 revenue forecast is expected to hit $143 million annually. This is a realised increase in revenue of 570% Year on Year respectively. Furthermore, the Earnings Per Share (EPS) is expected to reach a positive figure by 2022. This upward trend is forecasted to continue moving into the next 5 years. The positive revenue targets are a product of the guidance provided by WKHS as they plan to uptick production and sales moving into 2021.
Steve Schrader Talks Workhorse on TD Ameritrade
USPS deal is on investors minds
The main bull factor surrounding this stock is the potential USPS contract which Workhorse have positioned themselves as promising contenders. Out of the final three contenders, Workhorse is the only manufacturer offering USPS a completely Electric solution. This award contract would allow for 180,000 vechiles to be manufactured for USPS use. If Workhorse are successful in landing the entire contract, the stock will soar to new heights well above its current 52 week highs (opinion not advice). However, there is a possibility Workhorse do not land the contract or only land a small portion of this award. In this instance, the stock will likely react inversely at a similar magnitude.
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 external pressure from the Government will force USPS to re-evaluate their current plans in revamping their delivery vehicles. As the only fully Electric Vehicle model applying for the award, investors have connected the dots on this opportunity arising.
In conclusion, the current stock price has been driven underneath analysts 12 month price targets which is a good sign for investors looking for entry. The company is currently positioned well for the USPS deal, however we can only speculate the outcome. In saying this, the company does not need the USPS deal to succeed in the Electric Truck industry.
Disclaimer: The author of this article is currently holding a mid-long term position in Workhorse (NASDAQ:WKHS). 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.