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Why Workhorse Group Stock Is Bouncing Back Today

What happened

Shares of electric-truck maker Workhorse Group (NASDAQ: WKHS), long considered a leader in the race to win a $6 billion-plus government contract to begin building up to 180,000 new USPS mail delivery trucks later this year, got pummeled yesterday.

In a surprise announcement, USPS said that for the second time in as many months, it will delay awarding its long-awaited contract, and now probably won't announce a winner before Q1 2021. Workhorse shares reacted as you'd expect them to, falling 19% by the closing bell -- but today they've turned around and are up 9.5% as of 12:50 p.m. EST.

Image source: Workhorse Group.

So what

Why the sudden change of heart among automotive investors? Possibly, it's because not everyone on Wall Street is overly concerned about this delay. After the news broke yesterday, for example, analysts at investment bank R.F. Lafferty published a note in support of Workhorse, arguing that reticence on the post office's part is "no major road block" for Workhorse, reports StreetInsider.com. To the contrary, Lafferty says it is still quite "bullish" on the stock and encourages investors to consider "buying on a pullback."

Conveniently, a "pullback" is just what Mr. Market gave us yesterday -- 19%!

Now what

Before you act on Lafferty's advice, however, here's something to consider: Another analyst -- Roth Capital Partners, which has historically been very bullish on Workhorse itself and even called the company the "best fit" to win the USPS contract -- now seems to be having second thoughts.

Writing in a note covered on TheFly.com, Roth warned that any delay in awarding the USPS contract gives Workhorse rivals Ford and Oshkosh extra time to upgrade their bids. Originally, the two companies were thought to be offering the post office only traditional gas-powered trucks for its fleet, but Roth says they have now come up with "an alternative vehicle solution" -- potentially an electric truck that could negate Workhorse's electric advantages.

The more time Ford and Oshkosh get to refine that offer, the worse things could get for Workhorse. And according to Roth, the contract might not even arrive in Q1 as promised, but "closer to mid-2020."

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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