Workhorse Group (WKHS): What next after recent momentum?

The stocks of the electric vehicle makers had accelerated this year with tremendous returns. Since the beginning of this year, Tesla (NASDAQ: TSLA) and Nio Inc (NYSE: NIO) have climbed by 496% and 373%, respectively. Nikola (NASDAQ: NKLA), which became a public company in June, had gained 296% from the time of its IPO. Against this backdrop, let’s see what the future holds for Workhorse Group (NASDAQ: WKHS), which has jumped 496% so far this year. 

Overview 

The Loveland, Ohio-based automaker designs and builds high-performance electric vehicles. The company develops cloud-based, real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency. Workhorse is currently focused on bringing the C-Series electric delivery truck to market and fulfilling its existing backlog of orders.

Gloomy Q2 results

Workhorse reported its second quarter 2020 results last month, which were unimpressive. The company’s net loss widened to $131.3 million in Q2 from $20.1 million in the prior year as a result of higher interest expenses. Revenue increased to $92,000 from $5,500 in the year-ago quarter.

Also read: Nio: Higher investment in autonomous technology to be key priority

With regard to its C-Series vehicle production, Workforce completed the Federal Motor Vehicle Safety Standards or FMVSS testing in June and delivered 650 vehicles to electric vehicle fleet solutions. The company updated in its Q2 earnings call that it is nearing the final design of the HorseFly delivery drone, and an improved root system for launching and recovering HorseFly from a Workhorse truck.

Problems

Since its inception, Workhorse had reported net losses in each year. The company’s turnaround is delayed by higher capital expenditures and labor costs. Workhorse has limited revenues and a history of negative working capital and stockholders’ deficits. The automaker expects its existing capital resources to be sufficient to fund its operations into 2022.

Final word

Unless and until it generates a sufficient amount of revenue, reduces costs and returns to profitability, the strategic partnerships like the ones that the company announced with Hitachi America, the subsidiary of Hitachi, will have to fuel Workhorse. WKHS stock has soared 10.49% yesterday on this deal.

Market watchers are dissatisfied with the company on its inefficiency in handling its intellectual properties. Most of the IPs company have either limited value or are set to expire soon.

Even though Workhorse has caught a huge attraction this year, it is better to keep a tab on its performance for the next few quarters and then invest in Workhorse stock.

DISCLAIMER: The article does not necessarily imply the views of AlphaStreet, and contains opinions of the author alone.