Form Penny Stock Workhorse Becomes Latest Penny Stock To Leave The Nest
Wondering if penny stocks are worth it? Just ask those who bought shares of Workhorse Group Inc. (WKHS Stock Report) at the start of the second quarter. Let’s face it, there will always be skeptics when it comes to stocks under $5. But if you can hack it as a day trader, then there’s no reason to discount penny stocks as options for making money in the stock market. Before we discuss Workhorse Group, let’s lay some framework.
First, what exactly is the definition of penny stocks? Ask some traders and they’ll say these are shares of companies trading for pennies; so anything under $1. However, if you look at the standard definition of penny stocks according to the Securities & Exchange Commission, you’ll see something different.
The Commission, which oversees market activities, defines penny stocks as those trading below $5 a share. Honestly, the definition doesn’t matter as much as the potential these stocks hold. Selfishly, I’ll use the latter definition because I can talk about more than just stocks under $1.
What Is Workhorse Group Inc. (NASDAQ: WKHS)
If you’ve followed PennyStocks.com for a little while, you’re probably familiar with Workhorse Group because it was one of the companies we’ve discussed for the better part of the last year. The company itself designs, develops, manufactures, and sells high-performance, medium-duty trucks. It utilizes an electric powertrain as well. In particular, the company focuses on the package delivery niche. Workhorse also has drone capabilities through its “Horsefly” product along with integrated tracking technology.
When we first started talking about the company, the U.S. President, Donald Trump was actually at the center of the initial corporate catalyst. This was around the time that General Motors (GM Stock Report) was looking to sell its Lordstown Plant to Workhorse, which was mentioned by name in a Trump Tweet. At the time WKHS stock was trading around $0.82.
The breakout to ensue saw the penny stock explode to highs of $5.37 by the end of July. An epic rally by any account. But like many penny stocks, WKHS ended up pulling back by the end of the year. Then when the market dropped in March, Workhorse wasn’t immune to the selling pressure. That took the penny stock back down to lows of $1.35.
Workhorse Stock Soars In Q2
While trading volume has remained relatively light compared to this week, WKHS stock has mounted an impressive rally in the second quarter. On April 1 of this year, shares opened for trade at $1.70 and as of highs on June 24, WKHS stock has climbed as much as 488%. Furthermore, since we began discussing Workhorse, the (former) penny stock has climbed nearly 1,120%. At $10 this is the highest price Workhorse stock has traded at in more than 3 years.
Why are shares of WKHS stock up? Let’s look at what’s happened over the last few weeks. On June 19th, market chatter from Business Journal pointed to the company singing of an LOI to sell 1,200 electric-powered pickups to ServPro. Commercial scale production of the”Endurance” electric truck is expected to begin early next year.
Then earlier this week, the company announced that it successfully completed Federal Motor Vehicle Safety Standards testing for its C650 and C1000 electric delivery vans. This was previously delayed on account of the coronavirus pandemic. The important part, confirmed by CEO Duane Hughes is that “With this late-stage milestone certification now behind us, we remain well-positioned to execute on our production timeline for the remainder of the year.”
Workhorse Pipeline Gallops Along
The future prospects for electric vehicles continue to strengthen. With the going public of companies like Nikola (NKLA Stock Report) and Tesla (TSLA Stock Price) reaching new stock price milestones awareness grows. Furthermore, Nio Inc. (NIO Stock Report) has started turning its business around and the rumblings of Lucid Motors possibly going public has brought more excitement to this niche.
Workhorse has about 1,100 orders pending with United Parcel Service and others. It expects to build 300-400 trucks this year. It’s client roster also includes FedEx, Alpha Baking, and W.B. Mason. Earlier this year, Virginia’s Center for Innovative Technology partnered with UPS’s (UPS Stock Report) drone delivery subsidiary UPS Flight Forward along with drone technology companies including Workhorse Group in tests designed to determine how unmanned aerial systems can assist medical professionals in their fight to stop the spread of the Coronavirus.
The stock trades “at significant discount to our estimate of its intrinsic value” according to Formidable Asset Management LLC. Furthermore, this “discount” is “despite its presence in this attractive niche, valuable intellectual property and potentially transformative strategic partnerships.”
Formidable also expressed potential value in Workhorse’s IP. The firm said that Workhorse’s 10% stake in electric pickup maker Lordstown Motors Corp. could be worth over $1 billion. Workhorse licensed IP for its W-15 electric pickup to Lordstown. This is the same startup led by former Workhorse CEO Steve Burns.
Can Workhorse Group Stock Continue Higher?
Workhorse Group shares have exploded this month (and quarter) but what will the future prospects hold for the company? While COVID-19 has impacted countless companies during the last 6 months, Workhorse appears to have weathered the storm. I’m sure the focus on drone technology doesn’t hurt it’s potential. In May, the company joined the Small UAV Coalition as an Associate Member.
The Coalition is a partnership whose Board members include Amazon Air, Wing, Intel, PrecisionHawk, and Verizon among other companies. The focus is on the research, development, production, and application of unmanned aerial systems and their benefits.
Focusing specifically on the “last mile delivery” portion of the logistics lifecycle, the viability of this process could prove beneficial. Considering that other companies like UPS are getting involved, it could be a justifiable option if proven at large scale. As far as growth goes, when we look at the last quarterly report, however, you can’t ignore the numbers. First-quarter net income came in at $4.757 million compared to a loss of $6.26 million during Q1 last year. But sales were down from the $364k Q1 last year to around $84k this year.
Workhorse CEO Duane Hughes said in the company’s earnings update, “We will be delivering our C-Series vehicles to customers in the second quarter, and we remain on schedule to achieve our target of delivering 300 to 400 vehicles by the end of this year. To that end, we are in the final stage of preparing a detailed production plan of when we can deploy vehicles into Ryder Systems’ sales channel starting in 2020 and into 2021.”
However, after such a huge move, can WKHS stock sustain these higher levels? Leave us a comment with your thoughts.