Moving Beyond the USPS in Last Mile EV Delivery

With the market focused on some of the largest electric vehicle manufacturers, Workhorse (WKHS) is slowly building an order book in the field of last-mile delivery vans. The stock originally rose on massive contract potential for U.S. postal services, but the company is slowly building a solid lag outside of government service.

Investors still have many questions about the company’s business capabilities after less than $ 1 million in revenue in the third quarter, but Workhorse continues to build potential businesses in the years to come. The USPS contract remains a wild card, and the company would best serve shareholders by not relying on this deal.

Further contracts

Workhorse started in 2021 with the meager goal of delivering 1,800 vehicles this year. The company had COVID-19 issues affecting production and capacity targets for 2020, but the market was likely expecting a far bigger target for a company trying to get part of a contract with the USPS for 165,000 EV vans receive.

While the government continues to delay the award of the estimated $ 6.3 billion contract, Workhorse signed a contract with Pride Group Enterprises for 6,320 C-Series all-electric delivery vehicles. The deal begins in July and runs through 2026 and would be worth over $ 300 million based on a truck ASP of $ 50,000.

The order follows an initial order for 500 C-1000 delivery vehicles from Pritchard Companies, which have built a distribution network for commercial vehicles with sales of over 30,000 units per year. Combined with the recent introduction of the Ryder contract, Workhorse is far less reliant on the USPS contract.

Unproven story

Despite years of collaboration with the USPS, Workhorse is still very unproven for an EV manufacturer. The company doesn’t even expect to ship 450 vehicles per quarter in 2021 after failing to hit its original meager target of 300 to 400 vehicles in 2020.

Analysts have aggressive 2021 targets with revenue estimates of $ 139 million. To achieve these estimates, Workhorse would either have to achieve a higher ASP (Average Sales Price) or actually deliver up to 2,800 vehicles. Investors should expect the EV van company to miss these analyst sales estimates while the stock may still rebound.

The story goes on

As investors at Tesla have seen over the years, the stock will trade based on the company making strides toward its growth story. More contracts, and even winning part of the USPS deal, will set Workhorse for a bright future in the EV van space without having to meet those initial financial goals.

The company currently has cash in hand of just $ 260 million. Therefore, Workhorse needs to increase production capacity and possibly work with Lordstown Motors to build capacity. Additionally, supply chain issues at a battery supplier are not contributing to the recent slow production ramp.

Bring away

The most important consideration for investors is that Workhorse will remain an extremely volatile stock in the EV space. As long as the company continues to make progress in winning business outside of the USPS contract and expanding capacity, the stock will remain a strong growth story.

With the large USPS contract seen as a bonus only, investors with a market cap of just $ 3 billion and an annual market opportunity of over $ 18 billion will do well in this stock. (See WKHS stock analysis on TipRanks)

Disclosure: No position.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be construed as an invitation to buy or sell any security.

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