If Workhorse (WKHS) is going to attempt to replicate 2020’s market gains (up 548%), then it certainly got off to a good start.
Shares took off ~13% this week after the electric delivery-van maker announced it had received a substantial purchase order.
The happy shopper is commercial-vehicle wholesaler Pride Group Enterprises, who is keen on Workhorse’s C-Series electric package-delivery vans – 6,320 of them, in fact.
Deliveries are expected to begin in July 2021, with roughly 600 per year through 2022-2023, with Workhorse expected to deliver the remaining 5000 between 2024 and 2026.
“To put this in context,” said Oppenheimer analyst Colin Rusch, “We are estimating WKHS will deliver 11,900 C-1000’s for 2021-24.”
Rusch estimates total revenue from the deal will be $500 million “with a ramp-up throughout the contract.”
Rusch is in no doubt as to the impact the deal could have, both financially and for investor sentiment.
“Coupled with the 500-vehicle order from Pritchard announced in late 2020, we believe demand for WKHS vehicles is significantly de-risked at present and expect the company will be able to ink additional orders in coming months,” the 5-star analyst opined.
“We also believe orders of this magnitude indicate WKHS’s financial performance is not dependent on a potential US Postal Service contract although we expect the company to win at least a portion of that program. We expect investors to now turn their focus to WKHS’s production ramp which we expect to accelerate by the end of 1Q21,” the analyst added.
The deal adds much appeal to the Workhorse story. New purchase order aside, the company’s main catalyst remains a coveted US Postal Services (USPS) contract to replace the USPS’s aging delivery trucks. The decision on the award’s recipient has already been through several delays, but the matter is expected to be settled before the end of Q1. Rusch expects Workhorse to “win at least a portion of that program.”
The Pride deal is the first to bear fruit from Workhorse’s partnership with Hitachi, who is providing the inventory financing for the purchase order.
“We expect the partnership will continue to help WKHS ramp production and sales throughout 2021,” the analyst summed up.
To this end, Rusch rates WKHS an Outperform (i.e. Buy), whilst keeping his $23 price target intact. (To watch Rusch’s track record, click here)
Overall, Wall Street sizes up WKHS as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the electric-truck maker. In the last 3 months, WKHS has received 3 Buy ratings versus 2 Holds. Meanwhile, the average price target stands at $24.20, which implies ~8% upside from current levels. (See WKHS stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
