$WKHS Really Overvalued
Workhorse is a commercial transportation vehicle company that’s focuses on sustainable and cost-effective solutions. Their current product line up includes the c-series trucks. Which are essentially electric postal delivery style trucks. They also have a drone business called horsefly, which they claim can help with delivering packages. Finally they also have Metron, an app that can keep track of their trucks and monitor them to help with inefficiencies.
If we take a look at valuation, at $15 we are sitting around $1.85 billion.
As you can see on the chart, they reached a high $43 a share back in early February. However, after failing to gain the USPS contract they fell all the way to $7.25. They became heavily shorted, and are now back on the rise for that reason.
If we look at their financial position, we easily see they are overvalued.
They have barely started to regrow sales, but they are still minuscule. They are valued about 1000x their ARR (Annual Rolling Rate) if we take the $500,000 they made in Q1. This is absurd. They have been in business for years and still can’t sell their products.
The competition in the space is only increasing. Rivian, Lion Electric, Proterra, and Arrival are all joining the fray, except they already have partnerships with delivery giants. Arrival has a deal with UPS. Rivian and Lion Electric both have partnerships with Amazon. And all of them seemingly have a better growth ahead, even accounting for the higher valuations compared to Workhorse.
Workhorse has never made a profit. The only time they had positive earnings is when their invest in Lordstown Motors blew up. Now RIDE is on the down tread. Their balance sheet is relatively healthy, and potentially a turn around could be possible, but unlikely. Back in October they sold 200 million in convertible notes, which are due 2024. They also have various other liabilities that total $204 million, including long-term. They have about $205 million in cash $200 million in Lordstown Motors. This is most of their liquid securities.
Of course they could last a while with that much money right?
Maybe. But things are still not good. In Q1 they lost $5.7 million in just cost of sales alone. This isn’t even operating costs. For every dollar of sales, it cost them twelve dollars just to build. Of course this could be improved if they scaled up production, but they aren’t receiving nearly enough sales to make a dent. The cashflows aren’t looking good. They lost about $36 million in Q1 alone. That could mean they burn through $144 million in cash for 2021. They also have their drone project which continues to burn money as well, even with no potential near term.
There was hope a few months ago. They could’ve won USPS, but probably due to their limited manufacturing capabilities, they didn’t get and lost it to Oshkosh Corp. This was surprising to some. They seemed like the perfect fit for the new electric government vehicles. Lots of protest rose up over it from some government officials and Workhorse. However nothing has come out of it. I don’t see a future where Workhorse gets the contract, unless the House can pass a bill forcing the USPS to go electric, but even then Oshkosh still might keep the contract. Even Cathy Woods sold her stake in Workhorse a few months ago.
Might add more too if I see a good opportunity.
Not Financial Advise.
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June 11, 2021 at 11:15AM