I think we’re getting to the point where we ought to be thinking about shorting Workhorse (NASDAQ:WKHS) stock — or at least selling it.
The stock has broken out to new all-time highs on September 18 and then lost the steam following so-called short-attack on WKHS. WKHS’s particular short attack story was the Workhorse’s postal-truck, the sexy, eco-friendly delivery van that seemed like it would mean a big breakthrough for the company is plagued with problems.
The attack didn’t last, and stock price regained its value. Of course, stock will continue to surge on hopes that U.S. mail truck order will be forwarded to Workhorse.
But is Workhorse stock a good buy at the moment?
What if the recent WKHS rally turns out to be a fluke, like an unexpected hit from a third-rate movie studio. As with all such fluky hits, the sequel is never as popular — and always more expensive — than the original. If USPS contract is awarded to the usual suspect, Ford/Oshkosh (which have substantial lobbying power and federal supply experience), WKHS shares will tumble down to single digits.
Some investors that tend to be too cautious may say how it seems that the contract is already baked in the current price … and how investors are more than enthusiastic. I would not say that. I think WKHS price could go towards $100 if they get the entire USPS deal. But I do not see the deal coming their way.
“…the NGDV ( next generation delivery vehicles) production schedule may be further delayed”United States Postal Service’s Office of Inspector General
And besides not getting the contract there is another possible outcome. USPS can extend the deadline again. This will also affect the WKHS stock price and many impatient investors might seek the profit elsewhere.
Wall Street loves a comeback story.
While Oshkosh/Ford partnership should now win this contract, in my eyes, I am sure they will get, if not all, at least a big chunk of it. Why Ford is ahead of Workhorse? Reading between the lines I found out that WKHS delivery truck was probably the best choice for USPS test drivers and some execs, but…
The inspector general’s report also questioned the agency’s decision to seek a custom-built delivery vehicle over a customized commercial “off-the-shelf” truck.source
…but “off-the-shelf” truck will probably be the best choice for big time funds and investors on Wall Street. Ford hitting the main page of Morning Brew once again.
People that have a lot of money will get more of it, while poorer investors will part with their money. This is how it usually goes, and this is why I actually am rooting for WKHS to win this contract. But who am I? Not a decision maker for sure.
So, is Ford at $7 per share and with a $28 billion market cap a better deal than WKHS at $27 per share and $3 billion market cap. If WKHS gets the deal the answer is obvious, but if Workhorse stays at 400 vehicle deliveries per year the answer is obvious as well.
How this will play out is anybody’s guess. But the end is near. So be careful, and be patient. Soon enough, however, there’s really only one thing to do here: Sell it. Well, maybe there’s another thing to do: Short it. Hmmm, perhaps a third thing: Buy puts.