The broader averages continue to defy and electrify with their record-breaking rally. But while some may be questioning its durability, in a market made up of stocks, Workhorse Group (NASDAQ:WKHS) should be on your radar. Let’s see what’s happening off and on the price chart of WKHS stock and offer one risk-adjusted way to position more smartly for the road ahead.
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All stocks correct at one point or another. But in a market that’s bigger and more diverse than a couple stretched indices and a handful of influential trillion-plus dollar capitalization stocks like Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT), shares of Workhorse stand out.
So, what is WKHS? Among other things Workhorse designs, manufactures and sells EV cargo vans and medium- and light-duty pickup trucks. And it’s fair to say even investors with just a passing interest in the stock market know how hot this up-and-coming area has been.
Tesla’s (NASDAQ:TSLA) Nasdaq-thumping gains and fresh all-time highs are one bellwether indicator of Wall Street’s decided fascination with this emerging industry. Another is TSLA’s jaw-dropping valuation of well more than $250 billion. By comparison, an old-school car company such as Ford Motors (NYSE:F) only fetches about $25 billion in market cap. General Motors (NYSE:GM) is barely larger with its $36 billion capitalization. There’s more too.
China’s luxury EV competitor Nio (NYSE:NIO) is another marker for just how hot the EV market has been. Since its own March bottom, shares have raced higher by approximately 725% to record levels. The stock is now also firmly valued as a large-cap at $16.60 billion.
Then there’s Nikola (NASDAQ:NKLA).
The EV semi and pickup truck outfit has been on a tear since getting a new lease on life through a SPAC reverse merger. Shares are valued at around $20 billion. And get this. Nikola is more of a designer than actual manufacturer. Despite its large-cap valuation the company has nothing more than a prototype at this point in time.
But what about Workhorse, and how does its stock fit into today’s equation? One thing which should be catching investors’ attention is despite eye-popping gains of around 1,200%, Workhorse’s valuation of just over $1.50 billion is a fraction of the other mentioned companies in this space.
Secondly and unlike Nikola at least, Workhorse is set to sell 300 to 400 of its vans this year. The company is beyond building a conceptual prototype or two. Sure, this year’s estimated sales won’t work out to a terribly high amount of revenue. But at least the rubber would be meeting road, right? And WKHS does have a pending order to build a total of 1,100 vans for UPS (NYSE:UPS) and DHL.
The buck for WKHS doesn’t stop there either.
Workhorse’s HorseFly delivery drone business is another area which puts the company in strong position within the increasingly important trend of “last mile” delivery service. There’s also its 10% stake and partnership with privately-held Lordstown Motors (LMC).
Currently LMC is trying to work out the financing to retool one of GM’s car plants for its new Endurance EV truck. If successful, Workhorse is in position to receive royalties on the first 200,000 vehicles sold.
Lastly, Workhorse is in the running for a $6.3 billion United States Postal Service contract for its next-generation delivery vehicle. And as InvestorPlace’s Matt McCall has noted, even a small piece of that business could provide a nice tailwind for a stock already projected to grow sales approximately eight-fold over the next couple years and turn the corner into a profitable company.
WKHS Stock Daily Price Chart
Source: Charts by TradingView
On the daily price chart and after crushing the market’s own hefty returns of the past few months, shares of Workhorse have pulled back to correct into a twice-tested low of its 38% retracement level this past week. What amounts to as a very small double bottom pattern, could prove to be a starting point for another substantial leg higher.
For the time being I’d watch for the small bottoming formation to continue holding. Should the pattern prove durable and stochastics is able to generate a bullish crossover signal, I’d see this as a purchase above Friday’s pivot high of $16.40.
I’d also recommend buying WKHS stock as part of a collar strategy. Bottom-line, this spread’s defined and reduced risk means investors can happily ride the trend higher over time. Moreover, stock traders will be in much better shape financially if a ‘back-up-the-truck’ situation goes from being in the rear-view mirror to what lies ahead.
Investment accounts under Christopher Tyler’s management owns Micron (MU) stock and its derivatives but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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