![]() The fund I manage is dedicated to investing in a small number of innovative technology companies that can really change our world. The strategy of buying out-of-the-money call options with short expiration dates still creates losses, especially with the high volatility cost. My worry is that these Reddit retail investors will lose a lot of money by chasing the stock at these levels. Even today, the historically aggressive sell-side consensus price target is at $25 (see below).īut up to now, fundamentals just don’t matter. Now, the stock is at $40.61, well above an already difficult-to-justify price target of $23. Oppenheimer initiated coverage in early September using a ridiculous peer group that includes CRISPR Therapeutics ( CRSP), Beyond Meat ( BYND), Nvidia ( NVDA), and Amazon ( AMZN), helping to create an inflated price/sales ratio of 6x 2024 estimated revenues of $541M, thereby justifying a price target of $23. Do not have skilled workers, no problem, just leak-out that the company is advertising on LinkedIn to hire a couple of hundred auto workers. That did not make a difference, so management sent out a news release at the end of August announcing Hitachi will provide consulting for production among other things. Unable to produce vehicles itself, the company sent a May news release of new Board members with production expertise. The company is a producer of news releases ( see here), not vehicles. Given management's history, I would take the recent "record" 6,320 unit order from a distributor - Pride Group - with no control over end-customer demand, with many undisclosed conditions, back-end-loaded over the next five years - with a grain of salt. Claiming blue-chip customers on the company's web site like DHL, FedEx ( FDX), and UPS ( UPS) when not delivering a vehicle to any of them for at least the last three years. What are examples of "exaggerated" commercial claims? In November 2017, Workhorse’s CEO made an unsubstantiated claim of receiving $300 million in pre-orders for plug-in hybrid pickup trucks that never materialized. The market has complete amnesia about the company’s checkered past, including raising equity with stock promoters that have since been banned by securities regulators ( see here), and making exaggerated claims about purchase orders and drone capabilities - where management actually doctored a photo to show one of its drones being in the air ( see here). The core issue is questionable management with no experience in running an industrial business. The company has constantly over-promised and not delivered for years. I believe that the issues run much deeper. Management added that Q4 deliveries will be "substantially below" the 300 - 400 vehicles previously projected due to primary battery supplier and COVID-19 issues. Workhorse only sold seven units to distributors (five to Pritchard, two to Ryder) zero to end customers like UPS. Since my last article on August 27th, the company reported dismal Q3 results of $565k in revenues (below consensus estimates of $1.8M) accompanied by a net loss of $84M. What has changed is the level of promotion and innuendo, creating FOMO (fear of missing out) on an EV story that keeps on going up. ![]() ![]() Revenues remain nominal, losses only increased, production is still not ready, and we are still waiting for the USPS contract announcement. Very little has changed from one year ago when WKHS stock was at $3. As discussed below, some of the company's issues are 1) lack of innovation, 2) exaggerated news releases about commercial progress, 3) weak management and its dubious dealings with stock promoters, and 4) an extreme overvaluation - currently $5B market cap with a mere $744k in trailing twelve-month revenues and a loss of $210M. Readers are encouraged to review my past articles here and here for a more in-depth analysis. ![]() WKHS can be viewed as a successful story stock that has been heavily marketed to retail investors. In the current risk-on, near zero-interest rate environment, story stocks have outperformed value stocks. #Workhorse usps driverA major driver to the story is the potential winning of the US Postal Service Next-Generation Delivery Vehicle (USPS NGDV) contract valued at over $6B to be paid over several years starting in January 2022. Workhorse ( NASDAQ: WKHS) stock has been a stellar performer, rising over 13x from a price of $3.05 one year ago to $40.61 today. ![]()
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