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Is Workhorse Stock a Solid Long Term Investment?


From a short-term investment point of view, the Workhorse Group's stock performance comes across as an unstable ride with too much uncertainty. However, as a long-term investment, the buy signal still exists as its future forecast shows enough promise to maintain support from current investors who are in this endeavor for the long haul. On March 25, 2022, the stock fell from $4.49 USD to $4.33 USD and while that's not an impressive number to boast with the price spike within the last two-week period has been up by nearly twenty-seven percent. At the moment, the volatility of this stock has painted the picture of Workhorse Group as a very high-risk stock investment due to the pivot sell point which began on March 24, 2022. So far, the daily average volatility level of this stock has been slightly over seven percent.

However, according to Seeking Alpha, the history of failure on Workhorse's part to deliver on its core product due to the Electric Vehicle (EV) bubble burst and the United States Postal Service (USPS) contract bid now over, unless Workhorse finds a solid direction to go on to survive and thrive as a company it could be as little as five years before it disappears into obscurity as the weaker companies establishing themselves in the EV industry is either bought out or forced into receivership as the stronger companies move forward. At the moment, Workhorse Group is in the "do or die" stage with a new Chief Executive Officer (CEO), Richard Dauch, and what direction are they going to go with the drone business. The success of this company rests on the shoulders of investors and how much of its history are they willing to ignore, especially now the business relations between Workhorse Group and USPS coming to an end. Adding to the drama is the deadlock existing between political parties and the current global situation over energy sources that has put the progress of the EV market into a tailspin. The Workhorse Group seen today is not the same that showed so much promise almost a year ago.

Workhorse Group's current situation was inevitable after over three years' worth of promises that were not kept. There were supposed to be two thousand EV units delivered in the year 2018 but only delivered four hundred. At the moment, all deliveries have been suspended and there have been over forty previously delivered EV units that were recalled due to performance issues. At the moment, the HorseFly drone platform could see some new demands due to rising tensions among nations while the Russian-Ukraine conflict continues. The world has changed dramatically in just a few short weeks and right on the heels of the COVID-19 pandemic that still continues to pave waves of uncertainty as once again politics are coming into play in that regard.

However, in certain governments with political leaders bent on steering their nations away from the use of combustion-reliant vehicles in favor of EVs, the expectation for EV delivery vans are expected to rise. While the contract with USPS may be ended, for now, there are still a number of companies that have a solid interest in hosting a fleet of EV units as the price of gas and oil continue to spike at controversial levels. The future of Workhorse Group will depend on the direction the CEO takes and how willing the company is to change how it's been doing business for the past eighteen months. Losing the USPS contract was a six billion dollar loss that Working Horse could not afford to lose in addition to the less-than-impressive reputation they've earned as a company failing to deliver on the promised product. As soon as Dauch took over as CEO on August 1, 2021, the announcement of the fort-one EV unit recalls, plus the suspension of all future deliveries came to pass.

Down But Not Out

Although Workhorse Group and its stock don't seem promising at the moment, they may still be worth the high-risk long-term investment as its stock value is at a fifteen-month low. One of its key investors, Lordstown Motors (RIDE) sold seventy-two percent of its 16.5 million share stake, bringing in nearly eighty million USD cash, and still holds another thirty-four million USD of stock. At the moment, Workhorse has approximately nine quarters' worth of liquidity, which buys it reasonable enough time to recover from the loss of the USPS as the demand for EV units is there with an order backlog of nearly eight thousand. The rest of the EV competition hasn't launched far enough ahead to count Workhouse Group out and with the new CEO in place who has a better arsenal of industry experience that has also seen a successful business formula, the opportunity is there to do more than just save Workhorse from going under. Richard Dauch is the same man who led Delphi Technologies through its merger with BorgWarner and has an impressive resume in the automotive industry. While he may not have the EV experience under his belt yet he does know enough about how to capitalize on the demand of motorists and the market trends that go with it. Furthermore, if Dauch didn't see potential in Workhorse Group he wouldn't have agreed to become its CEO. As he sorts through the mess, the recalls and the suspension of EV units may have been a smarter move than just a sign of failure. What Dauch has done is put the company on reset, which is what it desperately needed. Instead of trying to hone up on promises that can't be delivered, start fresh with a new sense of purpose and work from there. This is how some of the most successful companies in the world have been known to operate and if both Dauch and Workhorse make all the right moves from this moment forth they could very well join the ranks as an epic Cinderella story. The key here, however, is convincing investors the gamble on Workhorse Group will be worth it if they're willing to tough it out for the long haul.

With the current situation between Russia and Ukraine, this has merely revved up the drone business, which now adds more potential value to Workhorse's HorseFly drone units. Add the rising cost of fuel consumption due to supply chain interruptions, and all the chips are in place to push the demand and production of EV units, and there is a window of opportunity for companies like Workhorse to take advantage of. Should they do this then all those who've invested in its stock stand to gain. However, Workhorse does have a debt of two hundred million USD, and the loss of USPS's contract are two key negatives that give investors good reason to approach any purchase of its stock with extreme caution. As the CEO of Workhorse Group, Richard Dauch has been busy cleaning house since he took over during the summer of 2021. Prior to taking the job, he met with some of the company's board members and the previous CEO, Duane Hughes. It was while Hughes was at the helm that the drama revolving around Workhorse's reputation as a company eventually led to the launch of a November 2021 investigation by the Department of Justice. Hughes actually took over as CEO in 2019 when its founder, Stephen Burns, handed over the reins. It was while Hughes was CEO the talk of a USPS contract began and it has since become a source of controversy as reports suggested there were insider trading schemes taking place which ultimately led to USPS setting up a contract with Oshkosh instead of Workhorse. While Hughes was at the helm, shareholders took it upon themselves to sue Workhorse the moment they saw red flags springing up that gave them cause for concern.

So Is Workhouse Stock Worth It?

With Duane Hughes out of the picture, as well as the abrupt resignations of top-ranked members of Workhorse Group, the cleaning house project taken on by Richard Dauch suggests from this point forward a step in the right direction for the company to do more than just survive. However, is it enough? Dauch's statement about transitioning Workhorse from a tech startup to a fully operational company came across as odd among financial experts who pay attention to stock trends and the companies involved. Workhorse was founded in 1998 in Union City, Indiana, by Stephen Burns and a team of investors when they took over from General Motors the production of the step-van and motorhome chassis of the P30/P32 series. They were actually taken over by Navistar International in 2005, the same company that sold them diesel engines. In 2012, the plant was shuttered as a means to ease the financial burdens the company was experiencing overall. During the spring of 2013, AMP Electric Vehicles took over the Workhorse Custom Chassis and important assets in favor of offering EV units to the consumer market. As of 2015, AMP changed its name to Workhorse Group Incorporated. On January 4, 2016, it joined the ranks of Nasdaq as NASDAQ: WKHS. This history lesson alone suggests Workhorse is anything but a startup.

However, when looking into Steve Burns stepping down as CEO from Workhorse in 2019 and briefly succeeded by Duane Hughes from 2019 until 2021, and now Richard Dauch in control, this company from 1998 until August 2021 is not quite the same as the one run today. As to be expected, whenever there is a change in management there is a change in direction, especially after a company has gone through a rough ride due to questionable business practices carried out by individuals who didn't have their priorities in the right place. Dauch has a solid track record of knowing where to put those priorities and how to make the impossible become possible. Whatever mud Workhorse Group pranced in prior to Dauch taking over as CEO is still being cleaned off and replaced with the same formulas of success Dauch used while with Delphi Technologies. This is a CEO that saw that company merge with BorgWarner so there is a possibility something is already in progress with Workhorse to ensure whatever scandalous baggage it had in the past will no longer hinder its growth potential as a company. With this being said, there is still a working relationship existing between Workhouse Group and General Motors. While on its own Workhouse Group still has to overcome product delivery issues there is the direction of General Motors and its further involvement in the development of EV units. Considering Workhorse Group performs more like an assembly plant that has its models based on some of GM's vehicular lineup, there are some possibilities here to consider that investors may want to pay close attention to.

Like all stocks, there is always a gamble. If anything, COVID-19 and the conflict between Russia and Ukraine should serve as reminders of how fast market trends can change as the supply and demand of so many products can be directly affected. What may have seemed promising as little as a month ago now shows signs of weaknesses not considered before. Until recently, the American and Canadian governments were heavily looking into zero-emission targets by replacing combustion motor vehicles with EV units. Now both nations are looking into reviving the oil industry as a means to meet global fuel consumption demands while the conflict between Russia, Ukraine, and now NATO, continues to escalate. As usual, politics plays a huge role in how market trends respond to whatever demands and regulations they come up with.

At the moment, what's working against Workhorse Group is time. Other companies who are taking strides in the EV industry may not have leaped by tremendous bounds in productivity but do have enough capital to work with to do so. If Workhorse Group wishes to remain competitive in the EV industry then they need to step up their game. However, they do have a niche in drones with HorseFly. With political tensions at an all-time high at domestic and international levels, these are becoming an increasingly desired product Workhorse could capitalize on. What Workhorse Group needs to do is figure out what direction they wish to go and make it known. Ultimately, this is what will decide whether or not its stock really is worth the long-term investment or not. Some experts feel Dauch has his work cut out for him, which is true, but again, this is a CEO that has the ability to rise to the occasion and it is suspected he will do so by the more optimistic. According to Stocks Register, the potential is certainly there to do so.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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