Workhorse Group Has Turned A Corner
After a rocky 2021, it looks like Workhorse Group (NASDAQ: WKHS) has turned a corner. A number of positive events including a large insider purchase have the stock bottoming and confirming a reversal in price action. The insider, Richard Dauch, CEO of Workhorse Group, purchased $155,000 worth of the stock or 50,000 shares bringing total insider activity in 2022 to roughly $222,000 and 70,600 in shares worth of purchases. This is noteworthy not only because the insiders are buying, but also because the purchases came only a few weeks after some very bullish news. The company, after logging negative revenue for the quarter (due to the recall of the C-1000), is guiding for production to start in the second half of the year and for revenues to top $25 million in the first year.
Workhorse Group Regroups, Production To Start In Q3 2022
Workhorse Group took a real beating when it was forced to recall its flagship C-1000 truck but it looks like the company is on track to resume production of it and other vehicles later this year. The Q4 revenue came in at a negative $2 million due to allowances and returns and produced a net loss compared to last year’s gains. The good news is the company is expecting to produce 250 vehicles in the 2nd half of this year including the revamped C-1000 and a new vehicle built on the W-750 chassis from Greenpower Motors.
In addition to the 2022 guidance, the company says it is now on track to build on a multi-year plan it has been working on for the last several quarters. Those plans include at least 2 other chassis systems slated for production in the second half of 2023. The company says it has just over $201.6 million in cash and equivalents which is ample to get into production this year. The question is whether that capital will sustain them into 2023. Assuming the company turns revenue positive in the back half of the year, we think it will.
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Institutional And Analysts Support Drives The Bottom In Workhorse Group
The institutions are buying the stock as well, and have helped drive the bottom in price action. The institutions have been net buyers for 3 of the last 4 quarters with activity picking up in Q1 of 2022. Institutional activity in that time span is worth about $97 million or 14.75% of the market cap with shares trading near $4.30. Total institutional ownership is now at 36% and growing and there is analysts' support for the stock too.
There were no analyst commentaries between early September 2021 and the Q4 earnings report in early March of 2022 but that changed dramatically following the Q4 report. At that time, 4 of the 7 analysts rating the stock came out with commentaries that include 3 upgrades from Neutral or Hold to Buy and 2 price target increases that put the consensus of those 4 at $5.3. This is a 23% premium to share prices and will move higher over the coming months assuming no bad news is delivered. That target compares to the $6.80 consensus which is down 64% over the last year but now edging higher.
The Technical Outlook: Workhorse Group Is In Reversal
Workhorse Group started putting in a bottom in late January and then confirmed a reversal in the wake of the Q4 release. The bottom and reversal is a Head & Shoulders which looks fairly strong to us. The price action is retreating to retest support at the $4.00 level, a retest that is consistent with the reversal in price action. Assuming support is confirmed at this level it would confirm the neckline of the pattern and with an upward bias. In this scenario, we see price action trending higher over the next quarter unless some other news comes out. If the next earnings report includes a positive update on production we see the stock moving up into the $8 to $10 range if not higher.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Workhorse Group (WKHS) | $0.80 | +6.2% | N/A | -0.10 | Reduce | $5.63 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
