DJ Workhorse Stock Rocketed Higher Because USPS Could Make Its Day Next Week -- Barrons.com

By Al Root

Shares of Workhorse, a maker of battery-powered commercial vehicles, jumped almost 13% Friday. The market appears to be prepping for a decision from the U.S. Postal Service about an order for vehicles to replace the white, right-hand-drive vans, ubiquitous on American roads. The pending decision should make Workhorse stock volatile next week, too.

Workhorse (ticker: WKHS) makes electric delivery vans ordered by several customers including Ryder System (R). Production and deliveries are ramping higher at Workhorse.

The company also bid on U.S. Post Office business to replace thousands of aging vehicles. There are a few bidders, but Workhorse is the only all-electric option available.

The request for proposals were due to the USPS by July 14. The decision is supposed to come 90 days after that, which means about Oct. 13. That's this coming Tuesday. The USPS wasn't immediately available for comment about timing.

"We expect Workhorse to be the recipient of the Post Office's $8.1 [billion award]," wrote Roth Capital analyst Craig Irwin in a Friday research report. "We expect Workhorse to be the recipient as [an electric-vehicle maker] is the best fit for the USPS application." The stop-start driving nature of USPS deliveries recharges batteries through regenerative braking, and the lower long-term maintenance costs associated with EVs are two of the reasons he's upbeat. Irwin rates Workhorse stock at Buy and has a $33 price target.

He isn't alone in his views. Wall Street, overall, is bullish on Workhorse stock, although the number of analysts covering the company is small. Four out of five rate shares Buy. The average Buy-rating ratio for stock in the Dow Jones Industrial Average is about 58%. About 30 analysts cover the average Dow-component stock.

The USPS contract is a big deal for the company. Another event also impacted Workhorse stock Friday. DiamondPeak (DPHC) is merging with Lordstown Motors. The date for shareholders to vote on the merger was set Thursday for Oct. 22. DiamondPeak shares rose almost 13% Friday on the announcement. Workhorse owns 10% of Lordstown.

The move gives Lordstown, the electric-pickup-truck start up, a market value of about $3.8 billion based on the 164 million shares outstanding if the merger is completed. That's worth about $380 million to Workhorse, and $43 million more than the stake was worth on Thursday.

DiamondPeak stock's gain amounted to about 13% of the total gain in Workhorse market value. Workhorse has a $2.8 billion market capitalization.

Barron's recently wrote positively about Workhorse stock because of both the Lordstown stake and the USPS deal. Shares are up 77% since the article appeared in July. We, frankly, didn't expect shares to go so far so fast. The stock price rise makes the USPS event more significant for the stock going forward. The company will need to win to maintain momentum.

Year to date, Workhorse stock has been on fire, rocketing 781%, far better than comparable returns of the S&P 500 and the Dow.

Write to Al Root at allen.root@dowjones.com

(END) Dow Jones Newswires

October 09, 2020 18:27 ET (22:27 GMT)

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