![]() Both of its competitors have been supplying the US and other governments with delivery and/or military vehicles for decades. Workhorse is not vertically integrated to provide a complete delivery truck like its competitors, does not have service or warranty support like its competitors, and is financially unstable. Workhorse has been a dysfunctional company that is not even close to delivering the several thousands of trucks required by the USPS. The bears state that Workhorse can neither deliver nor compete for the USPS contract. Also, Workhorse shorts may be impacted by many Workhorse investors selling on the news, leading to forced buy-ins at elevated prices (as the borrowed shares would be sold, forcing the short-sellers to cover). ![]() Short interest is currently 22% of shares outstanding. The bulls could benefit from a margin squeeze on short positions that would exacerbate the stock price jump. I would not change Workhorse’s price target even if the company wins the bulk of a USPS contract that they cannot deliver on, and where they will lose tons of money). A s discussed later in this article, winning a USPS contract with a negative gross margin is actually a value detractor. In the bull case, receiving the majority of a $6B contract, let’s say $4B, very generously valued at 1x next ten-year revenues with no discount rate, equates to a maximum stock price of slightly over $46 ($38 per share for the USPS contract, $2 for its 10% Lordstown stake, and $6 based on the extremely bullish sell-side estimates of private delivery van contracts – assuming they exclude any USPS revenues in their estimates). ![]() The bulls believe that when this contract is announced. It should be noted that Lordstown Motors is an independent company, of which Workhorse has a 10% stake. The reason for this new strategy is that during the Q2 conference call, management stated that the Workhorse facility in Union City, Indiana may not be cost-competitive for such a large contract today. How that is exactly going to be accomplished is still a mystery. The bulls see this as a further impetus for Workhorse to be awarded the USPS contract.Ī new twist in the bull case, is the potential to retrofit the Lordstown Motors facility to make the postal service delivery vans, in addition to its core EV pick-up truck. Ohio is a swing state, and Trump wants to get re-elected. An added plus is that EV trucks have low maintenance costs. Since August 10th, there has been increasing speculation on Workhorse winning the US Postal Service delivery vans. Management remained optimistic stating that it hopes to produce a couple hundred trucks at the end of the December quarter. Management noted that only one truck was delivered in Q2, and only a handful of trucks are expected to be delivered in the current quarter. On August 10th, Workhorse reported Q2 results with revenues of $92k, and a net loss of $131.3M (including a $108.4M non-cash charge mostly due to the change in the fair value of a convertible note due to the sharp rise in the stock price during Q2). Since I wrote an article featuring Workhorse (NASDAQ: NASDAQ: WKHS) published on August 5th, Workhorse stock has been quite volatile in the $15 to $19 range on higher trading volumes.
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