Workhorse Group: Is This EV Stock a Buy Post Q2 Results?
August 11 2021 - 5:38AM
Finscreener.org
The companies part of the electric vehicle space have
experienced a massive pullback in their stock prices in 2021 after
a stellar performance last year. Investors are worried about the
steep valuations of EV stocks as well as the increase in the number
of players operating in this rapidly expanding addressable market.
However, the shift towards clean energy solutions is inevitable
making electric vehicle companies solid long-term bets.
Here we take a look at Workhorse Group (NASDAQ: WKHS),
a stock that is down 50% year to date but might remain attractive
to contrarian investors right now.
How did Workhorse Group perform in Q2?
Workhorse Group announced its second quarter of 2021 results on
August 9 and reported sales of $1.2 million and a net loss of $43.6
million. While sales were significantly higher than its prior-year
period of $92,000, Wall Street forecast a loss of $0.29 per share
or approximately $36 million in Q2. Analysts also expected
Workhorse to post revenue of $6.41 million in the quarter.
We can see that Workhorse missed revenue and earnings estimates
by a huge margin and the stock is down over 4% in early market
trading on August 10.
Workhorse Group designs, manufactures, and sells electric
vehicles and aircrafts in the U.S. It has also developed a
cloud-based real-time telematics performance monitoring system that
allows fleet operators to optimize energy and route efficiency.
Workhorse is focused on delivering medium-duty commercial EV trucks
and it shipped 14 of its C-Series delivery vans in Q2. In the
prior-year period, the company delivered just one truck to its
customer.
Workhorse reported an operating loss of $22.7 million in Q2
compared to a loss of $7 million in the year-ago period. However,
its cash balance improved from $26.2 million to $156.6 million in
the last 12-months.
Workhorse managed to improve its liquidity position by selling
72% of its stake in Lordstown Motors (NASDAQ: RIDE),
another EV company that is grappling
with a massive sell-off due to allegations against its
now-former CEO Steve Burns.
In fact, Burn was also at the helm of Workhorse Group, and the
design for Lordstown’s pick-up truck was licensed from the former.
Workhorse received a 10% stake in Lordstown Motors for this
licensing deal. Workhorse would have raised close to $80 million in
cash after it lowered its stake in Lordstown.
What next for investors?
Workhorse appointed Rick Dauch as its CEO this July who
previously led Delphi Technologies - an auto parts manufacturer.
Dauch is a veteran in the automobile industry and is optimistic
about the long-term prospects of Workhorse Group.
He explains, “I joined Workhorse because of their leadership
position in last mile delivery technologies, the nearly 8,000
diverse customer order backlog confirmed with standard vehicle
purchase agreements that include typical terms and conditions,
eight million miles of road-tested delivery trucks operating in the
field and the opportunity to be a market leader in our space.”
Dauch is already planning a massive revamp of the company’s
flagship product which is the C-Series van. This EV has around
8.000 pre-orders but has a cargo-carrying limit of just 6,000
pounds. Workhorse now aims to revise the designs to accommodate a
larger load which should increase demand over the upcoming
years.
Workhorse stock is valued at a market cap of $1.21 billion.
Analysts expect the company to increase sales to $75.16 million in
2021 and to $246 million in 2022. This means the stock is valued at
a forward price to 2022 sales multiple of 4.9x which is very
reasonable considering its growth rates.
The improvement in the top line will also allow the company to
narrow its bottom line from a loss per share of $1.71 in 2021 to
$0.38 in 2022.
Workhorse stock went public back in August 2014 and has since
delivered close to 900% in cumulative returns, despite the recent
pullback. However, similar to most other companies part of a
nascent industry, investing in Workhorse carries massive risks
given its lack of visibility in terms of revenue and earnings.
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