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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